GRI ESRS-Professional ESRS Professional Certification Exam Practice Test

Answer : A, B, C

The double materiality assessment process consists of multiple steps, with Step A: Understanding the Context focusing on setting the groundwork for identifying material impacts, risks, and opportunities (IROs).

Step A includes:

Mapping the organization's value chain (Option A)

This step involves identifying all elements of the organization's value chain, including suppliers, distributors, and business partners, to understand where sustainability impacts occur.

It helps in pinpointing potential sustainability matters, risks, and opportunities related to both impact and financial materiality.

Engaging with affected stakeholders to gather input (Option B)

Stakeholder engagement is a critical part of the materiality assessment as it informs the organization about direct and indirect sustainability impacts.

The ESRS guidance stresses that businesses must engage with affected stakeholders (e.g., employees, communities, consumers) and sustainability experts as part of the due diligence process.

Analyzing the legal and regulatory landscape (Option C)

Organizations must review applicable laws, regulatory frameworks, and international sustainability commitments that may affect their sustainability reporting obligations.

This ensures compliance with EU regulations (CSRD, ESRS, Taxonomy Regulation, SFDR) and other relevant legal requirements.

Incorrect Answer:

Answer : C

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.

Answer : A

Under ESRS 2 and topical ESRS, external assurance is not required for all information reported. Instead, assurance requirements depend on specific regulatory obligations and the phase-in periods set by the Corporate Sustainability Reporting Directive (CSRD).

Limited Assurance Requirement Initially

CSRD mandates limited assurance over sustainability information at first, with reasonable assurance (more stringent) to follow in later years.

However, not all data points require assurance---only those specifically outlined in the European Commission's assurance framework.

Mandatory Assurance for Some Disclosures

ESRS 2 covers general disclosures, but only certain metrics and targets under specific topical ESRS require external assurance.

Appendix C of ESRS 2 outlines which disclosures require assurance.

Entity-Specific Exemptions & Phase-in Rules

Some disclosures do not require assurance if they are deemed immaterial based on the materiality assessment.

SMEs and first-time reporters have phased-in assurance requirements.

Thus, external assurance is not required for all ESRS 2 and topical ESRS disclosures, making the statement True.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772

Compilation Explanations January - November 2024

Answer : A

Nature is indeed recognized as a 'silent stakeholder' in the European Sustainability Reporting Standards (ESRS). This term implies that, although nature cannot actively voice its concerns, it remains a critical component of sustainability reporting due to its fundamental role in sustaining life and economic activity. ESRS emphasizes that organizations must consider their impacts on nature, ecosystems, and biodiversity as part of their sustainability disclosures.

This recognition aligns with the concept of double materiality embedded in the ESRS framework, which considers both the financial impact on an organization and the organization's impact on environmental and social matters. The ESRS explicitly integrates biodiversity and ecosystems (ESRS E4) as a key topic, reflecting the need to account for the effects of business activities on nature, even if nature itself cannot actively advocate for protection.

The silent stakeholder concept reinforces the duty of care that organizations hold in assessing and mitigating their impacts on biodiversity, land use, pollution, and natural resources. This aligns with the United Nations Sustainable Development Goals (SDGs) and the EU Biodiversity Strategy for 2030, both of which emphasize the protection and restoration of natural ecosystems.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 (ESRS E4 - Biodiversity and Ecosystems).

EFRAG Guidance on Stakeholder Engagement -- Highlights nature as an affected stakeholder in sustainability matters.

EU Biodiversity Strategy for 2030 -- Emphasizes that economic activities must integrate ecosystem preservation and restoration.

This confirms that the statement is true under ESRS standards.

Answer : C

The ESRS (European Sustainability Reporting Standards) framework consists of three primary categories of standards:

ESRS 1 (General Requirements):

ESRS 1 sets out the fundamental principles and requirements for sustainability reporting.

It provides an overview of the structure and drafting conventions of the ESRS framework, defining the categories of ESRS standards: cross-cutting, topical, and sector-specific.

It also establishes the double materiality principle as the basis for sustainability disclosures.

ESRS 2 (General Disclosures):

ESRS 2 outlines the core disclosure requirements applicable to all sustainability topics, ensuring comparability and completeness.

It includes general governance, strategy, impact, risk, and opportunity management disclosures applicable to all sustainability topics.

These disclosure requirements apply to all undertakings regardless of the specific sustainability topics being reported.

Topical Standards:

The ESRS framework includes ten topical standards covering the three key dimensions of sustainability:

Environmental (E): ESRS E1 (Climate Change), ESRS E2 (Pollution), ESRS E3 (Water & Marine Resources), ESRS E4 (Biodiversity & Ecosystems), and ESRS E5 (Resource Use & Circular Economy).

Social (S): ESRS S1 (Own Workforce), ESRS S2 (Workers in the Value Chain), ESRS S3 (Affected Communities), and ESRS S4 (Consumers & End-users).

Governance (G): ESRS G1 (Business Conduct).

These standards provide specific requirements on sustainability matters, complementing the general disclosure requirements in ESRS 2.

Sector-Specific Standards:

Sector-specific ESRS are currently under development.

These will address sustainability matters specific to different industries, ensuring that sectoral nuances are properly considered.

They aim to fill gaps not sufficiently covered by the topical standards by defining industry-specific impacts, risks, and opportunities.

Why is C. ESRS 1; ESRS 2; topical standards; sector-specific standards the correct answer?

ESRS 1 (General Requirements) comes first, setting the foundation.

ESRS 2 (General Disclosures) follows, providing cross-cutting disclosure requirements.

Topical standards are next, covering specific sustainability topics.

Sector-specific standards are the final category, though they are still in development.

Thus, the correct order aligns with the official structure of the ESRS framework as mandated in Commission Delegated Regulation (EU) 2023/2772.

Official Commission Delegated Regulation (EU) 2023/2772, various EFRAG guidance documents, and CSRD-related references:

Commission Delegated Regulation (EU) 2023/2772, Annex I: Structure of the ESRS framework.

EFRAG Compilation of Explanations (January - November 2024): Explanation of ESRS categories.

EFRAG Mapping of Sustainability Matters to Topical Disclosures (Q&A ID 177): Confirmation of ESRS 1, ESRS 2, and the ten topical standards.

Answer : A

Entity-specific disclosures are required if a material sustainability matter is not covered or sufficiently detailed in the ESRS. According to ESRS 1, paragraph 11, if an undertaking identifies an impact, risk, or opportunity that is not adequately covered by an ESRS but is material due to its specific facts and circumstances, it must provide additional entity-specific disclosures. This ensures that users of sustainability reports receive relevant and complete information.

Key Provisions from ESRS:

ESRS 1, paragraph 11:

Requires entity-specific disclosures when material sustainability matters are missing or not sufficiently covered in the ESRS.

ESRS 1, paragraph 30:

Mandates that companies must disclose additional entity-specific disclosures if material matters are not covered with sufficient granularity in ESRS.

ESRS 1, Appendix A (Application Requirements):

Provides further guidance on entity-specific disclosures, ensuring consistency and comparability while allowing companies to disclose material matters not addressed by ESRS.

ESRS 2, Disclosure Requirements (SBM-3, IRO-1, GOV-1 to GOV-5):

Outlines the minimum disclosure requirements that apply when companies make entity-specific disclosures related to governance, strategy, impacts, risks, and opportunity management.

Thus, if a sustainability matter is deemed material and is not sufficiently addressed by ESRS, entity-specific disclosures are mandatory.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Paragraphs 11 and 30.

ESRS Implementation Q&A Platform -- Compilation of Explanations January -- November 2024.

Answer : A, C, D

Inline XBRL (iXBRL) is the digital reporting format required under the Corporate Sustainability Reporting Directive (CSRD) to ensure standardized and machine-readable sustainability reporting.

It is required under CSRD for sustainability reporting

The CSRD mandates the use of Inline XBRL for sustainability reports, ensuring digital tagging for structured data submission, making information easier to analyze by regulators and investors.

(A) is correct

It only applies to narrative disclosures, not numerical data

Incorrect. Inline XBRL applies to both numerical data (KPIs, metrics) and narrative disclosures, allowing structured reporting across qualitative and quantitative sustainability information.

(B) is incorrect

It makes reports both human-readable and machine-readable

True. Inline XBRL embeds machine-readable tags into a human-readable document, ensuring both usability and compliance with digital reporting requirements.

(C) is correct

It ensures that tags are embedded within a visually clear format

Correct. The Inline XBRL standard ensures that the digital tags do not alter the visual presentation of the report, maintaining clarity for human readers while allowing structured data extraction.

(D) is correct

Conclusion:

Inline XBRL is required under CSRD (A), makes reports both human-readable and machine-readable (C), and ensures a visually clear format (D). However, it applies to both narrative and numerical data, making (B) incorrect.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772

Compilation Explanations January - July 2024