ESG Cross-Cutting Standards

ESG Cross-Cutting Standards

ESRS 1 and ESRS 2 are not standalone reporting standards but are instead integral components of the broader framework of CSRD.

Together, they form the Cross-Cutting Standards that are designed to address key sustainability challenges faced by businesses across various sectors. Here’s how ESRS 1 and ESRS 2 serve as cross-cutting standards:

• Holistic Approach: ESRS 1 sets the stage by establishing general disclosure requirements that encompass environmental, social, and governance aspects of sustainability. It ensures that companies take a holistic approach to sustainability reporting.
• Customized Reporting: While ESRS 1 provides a general framework for reporting, ESRS 2 offers specific guidance tailored to the unique needs and challenges of different industries. By integrating sector-specific disclosures, ESRS 2 ensures that reporting is relevant and meaningful across diverse business sectors, enabling stakeholders to make informed comparisons and assessments.
• Materiality-driven Reporting: Both ESRS 1 and ESRS 2 emphasize the importance of materiality in reporting. Materiality refers to the significance of sustainability issues to a company’s stakeholders and business operations. By conducting materiality assessments and focusing on material topics, companies can prioritize their reporting efforts on issues that matter most to their stakeholders, enhancing the relevance and credibility of their disclosures.
• Continuous Improvement: The Cross-Cutting Standards of ESRS 1 and ESRS 2 promote a culture of continuous improvement in sustainability performance. By requiring companies to disclose their policies, risks, performance indicators, and stakeholder engagement practices, these standards encourage transparency and accountability.
• Integration with Business Strategy: ESRS 1 and ESRS 2 emphasize the integration of sustainability into the core business strategy of companies. By aligning sustainability goals with business objectives and disclosing how sustainability considerations inform decision-making processes, these standards promote the integration of sustainability principles into every aspect of business operations. This integration ensures that sustainability is not treated as a separate or peripheral concern but is instead embedded into the DNA of the organization.

In essence, ESRS 1 and ESRS 2 serve as the backbone of CSRD reporting, providing a comprehensive and flexible framework that enables companies to address a wide range of sustainability challenges. By embracing these cross-cutting standards, businesses can demonstrate their commitment to responsible and transparent business practices while driving positive environmental, social, and economic outcomes.