ESRS 1 General Requirements – explained simply

What ESRS 1 is about

ESRS 1 contains no numbered disclosure requirements of its own and is still a central standard. It does require some disclosures, for example on reliefs used or omitted information; they are reported under BP-1 in ESRS 2. It describes the approach: Which topics are material? Which characteristics must the information meet? When may information be omitted? How far does the reporting boundary reach? How is the sustainability statement structured? ESRS 1 always applies together with ESRS 2 and the topical standards. For this reason ESRS 1 and ESRS 2 are regarded as “cross-cutting” standards.

Double materiality: two perspectives

Double materiality looks at each topic from two perspectives: impacts (impact materiality) and financial materiality (risks and opportunities). A topic is material if it is material from at least one perspective. For this topic, the information that explains the material impacts, risks and opportunities (IROs) is then to be disclosed.

• Impact perspective: actual and potential, positive and negative impacts on people and the environment, in the company’s own operations and in the upstream and downstream value chain. The materiality of negative impacts depends on severity (scale, scope, irremediable character) and, for potential impacts, also on likelihood; for human rights, severity takes precedence. Actual impacts are assessed as they occurred in the reporting year; for potential impacts, only implemented policies and actions that demonstrably reduce severity or likelihood count, planned ones do not. Important: an impact can also be financially material, from the start or later, for example if the company depends on the resources concerned
• Financial perspective: the logic is familiar from everyday risk management. New is the focus on sustainability matters, also from the value chain and also without an impact of the company’s own, for example physical climate risks. Likelihood and potential magnitude of the financial effects are assessed
• No netting: positive impacts are assessed on their own, without netting against negative ones. Compliance with law is not a positive impact, nor are actions against the company’s own negative impacts
• Materiality at four levels: materiality runs through the whole assessment:
  1. IROs: the individual impacts, risks and opportunities are assessed. They can be very granular or grouped together
  2. Topics and sub-topics: if an IRO is material, the related topic or sub-topic is material
  3. Topical standards: a topical standard is to be applied if at least one of its topics or sub-topics is material. Excluding whole standards is therefore quite possible
  4. Information: the last filter before the disclosures is the materiality of the information: only what can influence the decisions of users is disclosed

Keeping the materiality assessment lean

The ESRS did not require a gapless assessment of every conceivable impact in the old version either, but it was often read that way. The revised ESRS make this clear: the effort may focus on areas where material IROs are likely, and the standards expressly name two approaches for this.

• Top-down: materiality or non-materiality of a topic is concluded from strategy, business model, sector, locations and value chain, without checking every impact one by one. If the result is not clear, a more detailed assessment follows
• Bottom-up: assessment of the individual impacts, risks and opportunities. Both approaches can be combined: top-down for some topics, bottom-up for others
• Qualitative and with available data: a qualitative assessment can be enough. Information that is available without undue cost or effort is used; an exhaustive search is not needed. For the value chain, sector or regional data are enough as well, without surveying suppliers directly
• Not anew every year: at each reporting date, it is only to be checked whether significant changes affect the earlier results. If so, the assessment is updated

Reporting boundary and value chain

The sustainability statement covers the same entity as the financial statements. Beyond that, it covers the upstream and downstream value chain to the extent that material impacts, risks or opportunities lie there. The metrics of the topical standards, however, cover only own operations; the exception is the GHG inventory with Scope 3. Value-chain metrics are needed only where a material impact cannot be understood otherwise. Special rules take precedence over the financial-statement boundary, including in the GHG inventory: the lessee reports the use of leased assets in its own operations, the lessor in its downstream value chain, and the share in joint operations counts as own operations. In a group, information is disaggregated where the IROs of individual subsidiaries differ significantly.

• Only what is material: information on every actor in the value chain is not needed, only the material information
• Estimating is allowed: data directly from business partners or estimates are permitted, for example sector averages, samples, spend-based data or other proxies
• Ask business partners, but do not overburden them: from companies with at most 1,000 employees, no more may be demanded for the sustainability statement than the VS standard sets as the upper limit (Annex II of Regulation (EU) 2026/1560; for companies with up to 10 employees, even less). Asking remains allowed. If a request goes beyond the cap, the partner must be told which information goes beyond it and that it may refuse. The partner does not have to provide anything beyond the cap. Responsibility cannot be shifted to the partner: missing information must be estimated or obtained in another way
• Gaps in the first 3 years: if value chain data are missing, the efforts, the reasons and the plans are to be explained

Reporting period, time horizons and comparatives

The reporting period is the same as that of the financial statements, including for the calculation of metrics. The time horizons are fixed: short term is the period of the financial statements, medium term runs up to 5 years after it, long term is more than 5 years.

• Breaking down the long term: if impacts or actions are expected over more than 5 years, the long-term horizon is broken down further
• Own horizons: own definitions for medium and long term are permitted if the prescribed ones lead to irrelevant information, for example because risk management, actions or targets work with other horizons or the sector has other planning cycles. This is to be disclosed
• Comparatives: the prior-year value is to be given for all quantitative metrics and amounts, and for targets also the value in the base year
• Exceptions at the start: no prior-year value in the first reporting year for companies that report for the first time from 2027. Companies that already report are exempt in the first year under the new set only for metrics that are not the same as in the old ESRS, that is, changed or new ones. And always when a topic is reported for the first time

Reliefs and omissions

The ESRS contain several reliefs that reduce the effort. Every relief used is nevertheless to be disclosed.

• Immaterial activities: activities that are not a material driver of an IRO may be excluded from the calculation of the related metric if the informative value does not suffer
• Partial reporting scope: if reliable data are available without undue cost or effort only for a clearly delimited part of the company’s own operations or value chain, the metric is reported for that part, together with an explanation of how coverage will be increased and what has improved compared with the prior year. This is not allowed for the greenhouse gas inventory
• Joint operations without operational control: they may be excluded from the metrics on pollution, water, biodiversity and circular economy, with an indication of the actions for better coverage. This does not apply to the GHG inventory
• Acquisitions and disposals: the inclusion of a subsidiary acquired during the year may be deferred to the following year. A subsidiary that leaves the group during the year may be removed from the start of the reporting year. Material events since the acquisition or until the disposal are nevertheless to be named
• Omission of information is possible in 4 cases: serious prejudice to the commercial position in an exceptional case (only if even an aggregated disclosure is not possible and the overall picture is not distorted), trade secrets such as know-how or innovation results, classified information and legally protected information, for example to protect persons. The omission is to be named for each datapoint and reassessed every year to see whether it still applies

Transitional provisions

The transitional provisions depend on how long a company has been reporting. Wave one comprises companies that already have to report for financial years 2024 to 2026. All others report for the first time from 2027.

• Wave one: the reliefs for whole topical standards apply only up to and including 2026, that is, only if the new set is already applied for 2026. The old set (as amended by Regulation (EU) 2025/1416) also lets wave one omit E4, S2, S3, and S4 for 2026, and up to 750 employees also S1 and Scope 3. Above both thresholds (more than EUR 450 million turnover and more than 1,000 employees), E4, S2, S3, and S4 may be omitted. If at least one of the two thresholds is not exceeded, even all topical standards may be omitted; ESRS 2 and the statement on whether the topics are material remain. From 2027, full reporting applies, except for the following deadlines
• Other undertakings: E4, S2, S3, and S4 may be omitted in the first 2 reporting years
• Anticipated financial effects: wave one reports them from 2028, quantitatively from 2030. Other undertakings are exempt in the first 2 years, and for quantitative disclosures in the first 4. Some climate disclosures on assets with material physical and transition risks apply without deferral
• Substances of concern and own workforce: quantitative disclosures on substances of concern: wave one from 2030, others after the first 3 years. Substances of very high concern, where the company uses articles containing them: wave one from 2028, others after the first year; producers and importers of articles get no deferral. Some disclosures on the own workforce: wave one from 2027, others after the first year
• State materiality anyway: whoever defers whole topical standards must still state whether the topics are material and, if they are, describe them briefly

Structure of the sustainability statement

All ESRS disclosures are in a dedicated, clearly identified section of the management report, human-readable and machine-readable. The statement has 4 parts in this order:

1. General information
2. Environmental information
3. Social information
4. Governance information

• Different structure: permitted with reasons. Taxonomy disclosures belong in the statement but may go into a separate appendix. A summary up front is optional
• Supplementary information: disclosures under other laws or frameworks such as GRI may also be included without materiality if they are clearly identified as such
• References instead of repetition: the same information appears once, where it is most relevant; elsewhere it is cross-referenced. Information from certain other reports may be incorporated by reference. The list is closed: other parts of the management report, the financial statements, the corporate governance statement, the remuneration report, the universal registration document, Pillar 3 disclosures and the EMAS environmental statement. The information must be a separate, clearly identified element, be published before or at the same time as the management report, be in the same language, have at least the same level of assurance and meet the same digital tagging requirements. For EMAS, it must also be prepared on the same basis, for example the consolidation scope
• Link to the financial statements: for amounts that are also in the financial statements, a reference to them is given. Data and assumptions are consistent with the financial statements where possible; material differences are to be explained

Where the data sits in the company

ESRS 1 mainly describes the approach. The information for it is usually already in the company, spread across familiar areas:

• Controlling and accounting know the reporting boundary and the reporting period and provide the amounts the statement refers to
• Risk management and internal control contribute risks and opportunities, scenarios and assumptions
• Procurement knows the suppliers, the supply chains and the procurement categories, a good first basis for the upstream value chain
• HR and workers’ representatives know the internal stakeholders. The workers’ representatives have to be informed in any case
• Legal and compliance know the interplay with other obligations and clarify possible omissions and references to other reports

Typical mistakes

These points come up most often in practice:

• Rating everything as material so that nothing is missed. This inflates the report and risks burying material information. Immaterial information does not belong in the statement as a mandatory disclosure, at most clearly identified as supplementary information
• Starting data collection before the materiality assessment is in place. Only the assessment shows which data are needed at all
• Describing the materiality assessment with platitudes instead of making the company’s own judgements traceable
• Assessing positive impacts wrongly: netting them against negative ones, or counting own actions against negative impacts or compliance with law as a positive impact
• Material IROs without consequences: not assigning IROs to an ESRS topic, or giving no policies, actions and targets for a material topic, not even a statement that there are none, or leaving out the required metrics
• Creating the materiality assessment once and never checking whether anything has changed
• Using a reporting boundary different from the financial statements. Deviations are permitted only in the exceptions provided for
• Excluding the value chain wholesale instead of estimating or explaining gaps, reasons and plans
• Using reliefs or deviating time horizons without disclosing it
• Repeating the same information several times instead of presenting it once and referring to it