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Which principles are essential for incorporating information by reference in the sustainability statement?
Incorporation by reference in sustainability statements under ESRS must adhere to specific principles to ensure transparency, accessibility, and alignment with financial and regulatory reporting. The key principles are:
(A) The referenced information must be clearly identified in the original document.
ESRS mandates that referenced disclosures must be explicitly identified in the original document to prevent ambiguity and ensure clear linkage to the sustainability statement.
(C) It must comply with digitalization requirements.
The referenced data must meet the same technical digitalization standards as the sustainability statement to ensure consistency and usability across digital platforms.
(D) It must meet the same level of assurance as the sustainability statement.
Any information incorporated by reference must be subject to at least the same level of assurance as the sustainability statement itself, ensuring reliability and accuracy.
Incorrect Option:
(B) It can be published later than the management report.
ESRS does not allow referenced information to be published after the management report. It must be available at the same time or earlier to maintain the coherence of disclosures.
Official Reference:
Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Section 9.1 -- Defines the principles of incorporation by reference.
EFRAG Compilation Explanations (January - July 2024) -- Provides guidance on referenced information's role in digital and assurance compliance.
Thus, the correct answers are A, C, and D.
Which of the following elements are included in the scope of a CSRD assurance engagement? Select all that apply.
A CSRD assurance engagement primarily focuses on ensuring compliance with the ESRS and the proper digital tagging of sustainability information. The elements included in the assurance scope are:
B . Compliance of the reporting with the relevant ESRS
Assurance engagements under the CSRD verify whether sustainability reports comply with the European Sustainability Reporting Standards (ESRS).
The assurance provider reviews disclosures to ensure alignment with ESRS requirements, including double materiality assessments and mandatory data points.
C . Compliance with the requirement to tag the sustainability reporting
CSRD requires that sustainability information be digitally tagged using the European Single Electronic Format (ESEF) to ensure machine readability and comparability.
Assurance providers verify the correct application of this tagging requirement, ensuring consistency with XBRL (eXtensible Business Reporting Language) standards.
Why is A. Verification of the company's financial statements incorrect?
A CSRD assurance engagement does not cover financial statements.
Financial audits are conducted separately, under the International Financial Reporting Standards (IFRS) or local GAAP requirements.
Sustainability assurance only applies to non-financial sustainability disclosures under ESRS.
Conclusion:
The scope of a CSRD assurance engagement includes: Compliance with ESRS (B) Verification of digital tagging (C) Not financial statement audits (A)
Official Commission Delegated Regulation (EU) 2023/2772, various EFRAG guidance documents, and CSRD-related references:
Commission Delegated Regulation (EU) 2023/2772, ESRS assurance scope.
EU Sustainable Finance Platform Report (2025): Confirmation of digital tagging as part of CSRD assurance.
Which of the following is included in the environmental section of the topical ESRS?
The Environmental Section of the topical ESRS includes disclosure requirements covering environmental sustainability matters. This section specifically relates to environmental objectives as defined in the EU Taxonomy, ensuring alignment with broader European sustainability goals.
The topical ESRS environmental standards (ESRS E1 - E5) cover:
ESRS E1 -- Climate Change (Mitigation & Adaptation)
ESRS E2 -- Pollution
ESRS E3 -- Water and Marine Resources
ESRS E4 -- Biodiversity and Ecosystems
ESRS E5 -- Resource Use and Circular Economy
These standards align with the environmental objectives of the EU Taxonomy Regulation (Regulation (EU) 2020/852) and require organizations to report on their material environmental impacts, risks, and opportunities (IROs).
Why Other Options Are Incorrect:
A . Social impact and labor rights: Incorrect, as this belongs to the Social (S) section (ESRS S1 - S4).
B . Financial performance information: Incorrect, as this is part of financial reporting, not ESRS environmental disclosures.
D . Corporate governance and board diversity: Incorrect, as governance matters are covered under ESRS G1 Business Conduct.
Official Reference:
Commission Delegated Regulation (EU) 2023/2772
Compilation Explanations January - November 2024
What must organizations disclose under the ESRS regarding their material impacts, risks, and opportunities? Select all that apply.
Under ESRS, organizations are required to disclose material impacts, risks, and opportunities (IRO) in accordance with double materiality principles. The ESRS framework emphasizes transparency and structured reporting of sustainability matters that are material from both impact and financial perspectives.
Key Disclosure Requirements for Material IROs
According to ESRS 2, organizations must disclose:
(A) The outcomes of their double materiality assessment: Organizations need to explain how they determined material sustainability matters, covering both impact and financial materiality.
(B) Information outlined in the topical ESRS and sector-specific standards: The disclosure of IROs must align with specific ESRS topical standards (e.g., ESRS E1 for climate change, ESRS S1 for own workforce) and sector-specific standards, ensuring comprehensive reporting.
(C) Minimum Disclosure Requirements on policies, actions, and targets: Organizations must disclose policies, strategies, action plans, and progress tracking mechanisms related to managing material sustainability risks and opportunities. ESRS mandates these disclosures to provide transparency on an entity's approach to risk mitigation and opportunity realization.
Incorrect Option
(D) A general overview of their sustainability policies, even if unrelated to specific material matters:
ESRS does not require companies to provide general sustainability policy overviews unless they relate to material sustainability matters. The focus is on material disclosures that affect business operations or external stakeholders.
Official Reference:
Commission Delegated Regulation (EU) 2023/2772, ESRS 2, Section 4.1 & IRO-1 -- Covers disclosure requirements for identifying and assessing material impacts, risks, and opportunities.
EFRAG Compilation Explanations (January -- November 2024) -- Details about ESRS 1 and ESRS 2 disclosure requirements on materiality.
Which of the following statements best captures the shift introduced by the CSRD compared to the NFRD?
The Corporate Sustainability Reporting Directive (CSRD) significantly strengthens sustainability reporting and assurance requirements compared to the Non-Financial Reporting Directive (NFRD). The key shift introduced by CSRD is the mandatory assurance of sustainability reports, which includes defined standards, scope, and providers.
Key Differences Between CSRD and NFRD:
Feature
NFRD (Previous Directive)
CSRD (New Directive)
Assurance Requirement
Voluntary
Mandatory
Who Can Provide Assurance?
Organizations could choose any provider
Member States decide between statutory auditors and independent assurance providers
Assurance Scope
Limited guidance
Defined ESRS-based scope
Assurance Level
No formal requirement
Limited assurance initially, transitioning to reasonable assurance by 2028
Reporting Scope
Limited to large public-interest entities
Expanded to all large companies and listed SMEs
Disclosure Framework
High-level requirements
Detailed ESRS framework with sector-specific standards
Key Provisions of the CSRD:
Mandatory Assurance:
Unlike the NFRD, the CSRD requires sustainability reports to be assured by an independent external provider.
The assurance process follows ESRS standards to ensure consistency.
Defined Standards and Scope:
CSRD specifies the scope of assurance, focusing on material sustainability disclosures, governance, and risk disclosures.
The European Commission is developing a standard methodology for assurance.
Transition to Reasonable Assurance:
Initially, limited assurance is required.
By October 2028, the EU aims to transition to reasonable assurance, aligning sustainability assurance with financial audits.
Why Other Answers Are Incorrect:
Option A: Incorrect -- The CSRD makes assurance mandatory, whereas the NFRD had a voluntary approach.
Option B: Incorrect -- The CSRD does not eliminate sustainability reporting assurance; it makes it more structured and rigorous.
Thus, the correct answer is C: The CSRD introduces mandatory assurance for ESRS reporting, with defined requirements for scope, standards, and providers.
Official Reference:
CSRD Directive (EU) 2022/2464 -- Assurance Provisions.
EU Platform on Sustainable Finance Report (February 2025) -- Assurance and Compliance Guidelines.
CEAOB Guidelines on Assurance of Sustainability Reporting (2024) -- Limited Assurance Transitioning to Reasonable Assurance.
