Sep-2025 GRI ESRS-Professional Certification Real 2025 Mock Exam [Q18-Q39]

Sep-2025 GRI ESRS-Professional Certification Real 2025 Mock Exam

ESRS-Professional Exam Questions and Valid PMP Dumps PDF

NEW QUESTION # 18
Which of the following statements about the CSRD reporting mandate are correct? Select all that apply.

• A. The CSRD only applies to companies headquartered in the EU.
• B. The organizations reporting under the CSRD do not need to report value chain information.
• C. The CSRD requires a double materiality assessment to be conducted for sustainability reporting.
• D. The CSRD is tied to other EU legislation which companies subject to the CSRD may need to comply with.
• E. The organizations reporting under the CSRD need to follow a specific reporting format.
• F. The CSRD mandate does not require external assurance for sustainability reporting.

Answer: C,D,E

Explanation:
TheCorporate Sustainability Reporting Directive (CSRD)includes specificreporting mandatesthat organizations must comply with. Below is an evaluation of each option:
* A. True- The CSRD requires organizations to conduct adouble materiality assessment, considering bothfinancial materiality(impact on the company's financial position) andimpact materiality(the company's impact on the environment and society).
* B. True- Organizations reporting under the CSRD mustfollow a specific reporting format, which includes structured disclosures usingEuropean Sustainability Reporting Standards (ESRS).
* C. False- The CSRDapplies to both EU and non-EU companiesthat have operations in the EU and meet the reporting threshold criteria. Non-EU companies generatingmore than €150 millionin annual turnover in the EU and having at leastone EU-based subsidiary or branchare subject to CSRD requirements.
* D. True- The CSRD isinterlinked with other EU legislation, including theEU Taxonomy Regulation and theSustainable Finance Disclosure Regulation (SFDR), ensuring companies align with broader EU sustainability goals.
* E. False- Organizations must report onvalue chain informationas part of theimpact, risk, and opportunity (IRO) management processwithin the ESRS framework.
* F. False- The CSRD mandatesexternal assurancefor sustainability reports, starting withlimited assuranceand progressing towardreasonable assurancein the coming years.
* Commission Delegated Regulation (EU) 2023/2772, Sections onDouble Materiality, Reporting Format, and Value Chain Information.
* EU Taxonomy Regulation & SFDR- Linkages with CSRD.
Official References:

NEW QUESTION # 19
What must organizations disclose under the ESRS regarding their material impacts, risks, and opportunities?
Select all that apply.

• A. The outcomes of their double materiality assessment
• B. Minimum Disclosure Requirements on policies, actions, and targets
• C. A general overview of their sustainability policies, even if unrelated to specific material matters
• D. Information outlined in the topical ESRS and sector-specific standards

Answer: A,B,D

Explanation:
Under ESRS, organizations are required to disclose material impacts, risks, and opportunities (IRO) in accordance withdouble materiality principles. The ESRS framework emphasizes transparency and structured reporting of sustainability matters that arematerial from both impact and financial perspectives.
Key Disclosure Requirements for Material IROsAccording 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 withspecific ESRS topical standards(e.g., ESRS E1 for climate change, ESRS S1 for own workforce) andsector-specific standards, ensuring comprehensive reporting.
* (C) Minimum Disclosure Requirements on policies, actions, and targets: Organizations must disclosepolicies, strategies, action plans, and progress tracking mechanismsrelated to managing material sustainability risks and opportunities. ESRS mandates these disclosures to provide transparency on an entity's approach torisk mitigation and opportunity realization.
* (D) A general overview of their sustainability policies, even if unrelated to specific material matters:
* ESRS doesnotrequire companies to provide general sustainability policy overviewsunlessthey relate to material sustainability matters. The focus is on material disclosures that affect business operations or external stakeholders.
* 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.
Incorrect OptionOfficial References:

NEW QUESTION # 20
Indicate whether the following statement is true or false.
All EU Member States decided that only statutory financial auditors are allowed to conduct the assurance of the sustainability statement, excluding other audit firms or Independent Assurance Service Providers.

• A. True
• B. False

Answer: B

Explanation:
Not all EU Member States have decided that only statutory financial auditors are allowed to conduct the assurance of the sustainability statement. TheCorporate Sustainability ReportingDirective (CSRD) mandates that sustainability reports beassuredby an external party, but it allows Member States to decide whether assurance engagements can be performed by firms other than statutory financial auditors.
* Limited Assurance Requirement:
* TheCSRD introduces a phased approachtoassurance, starting withlimited assuranceand transitioning toreasonable assuranceover time (expected by 2028).
* Initially,limited assuranceis required across all Member States.
* Flexibility for Member States:
* EU Member Stateshave discretionto allowother independent assurance service providersto conduct the sustainability assurance, in addition to statutory auditors.
* Some countries mayrestrictsustainability assurance to statutory auditors, butthis is not an EU- wide rule.
* Upcoming EU Assurance Standards:
* TheEuropean Commissionis working on developing acommon EU assurance standardfor sustainability reporting.
* TheCommittee of European Auditing Oversight Bodies (CEAOB)has issued non-binding guidelinesonlimited assurancefor sustainability reporting.
Key Provisions:Thus,the statement is falsebecausenot all EU Member States have restricted sustainability assurance to statutory financial auditors. Some allowother independent assurance providersto conduct the engagements.
Official References:
* CSRD (Directive (EU) 2022/2464) Assurance Provisions.
* EU Platform on Sustainable Finance Report (February 2025) - Assurance Standards and Guidelines.
* CEAOB Guidelines on Limited Assurance for Sustainability Reporting (September 2024).

NEW QUESTION # 21
Which of the following is true about setting thresholds for financial materiality under the ESRS?

• A. Financial materiality thresholds are based on the likelihood of occurrence and the potential magnitude of financial effects.
• B. Thresholds should focus exclusively on the short-term time horizon.
• C. Organizations should only use monetary thresholds, such as revenue or costs.
• D. Reputational risks cannot be considered financially material.

Answer: A

Explanation:
Under the ESRS framework, financial materiality is assessed based on a combination of:
* Likelihood of occurrence- The probability that a sustainability matter will have a financial impact.
* Potential magnitude of financial effects- The scale of the impact on financial position, performance, cash flows, access to finance, or cost of capital over short-, medium-, or long-term periods.
This is outlined in ESRS 1, which states that a sustainability matter isfinancially materialif it could reasonably be expected totrigger material financial effectson an undertaking. Financial materiality is not limited to issues under the direct control of the company; it includesdependencies on natural, human, and social resourcesthat could create risks or opportunities.
* Option A:The ESRS framework allows for bothqualitative and quantitative thresholds, not just monetary ones (e.g., revenue or costs).
* Option C:Reputational risks can be financially material, as they may affect access to finance, cost of capital, or customer trust, ultimately influencing the company's financial performance.
* Option D:Thefinancial materiality assessmentis conducted for theshort-, medium-, and long-term, not just the short term.
Why the other options are incorrect:References:
* Commission Delegated Regulation (EU) 2023/2772
* Compilation Explanations January - July 2024, ESRS 1 on Financial Materiality
* EFRAG Guidance on Double Materiality and Risk Assessments

NEW QUESTION # 22
What is the PRIMARY purpose of creating a cross-departmental taskforce for CSRD compliance?

• A. To reduce the overall workload by assigning all tasks to a single department
• B. To ensure coordinated efforts, meet reporting timelines, and manage sustainability reporting responsibilities across the organization
• C. To create a hierarchical structure that limits communication between departments
• D. To minimize interaction between different organizational departments

Answer: B

Explanation:
Across-departmental taskforceis crucial forCorporate Sustainability Reporting Directive (CSRD) complianceas it enables an organization tocoordinate sustainability reporting efforts effectively.
Key responsibilities of the taskforce include:
* Ensuring alignment across departments(e.g., Finance, Compliance, Legal, ESG, and Operations) to gather accurate sustainability data.
* Meeting reporting timelinesrequired underESRS and CSRD regulations.
* Managing responsibilities across teamsto ensure sustainability disclosures are consistent with financial reporting controls.
* Enhancing cross-functional collaborationfordouble materiality assessmentand ensuring compliance withassurance and audit requirements.

NEW QUESTION # 23
Which of the following are key steps in preparing to develop an ESRS report?
Select all that apply.

• A. Focusing solely on financial data collection.
• B. Benchmarking and gap analysis.
• C. Setting up internal controls and stakeholder engagement processes.
• D. Preparing for materiality assessment.
• E. Planning for external assurance.
• F. Disregarding stakeholder opinions.

Answer: B,C,D,E

Explanation:
Preparing anESRS reportinvolves multiple key steps to ensure compliance with CSRD requirements. Below is an evaluation of each option:
* A. True-Internal controlsandstakeholder engagementare critical for ensuring accurate sustainability reporting. Stakeholders play a role inmateriality assessmentsand governance structures.
* B. True-Materiality assessmentis essential to determinewhich sustainability matters are most relevantfor disclosure. The ESRS framework requires organizations to report only onmaterial sustainability topics.
* C. False-Stakeholder opinions are crucialin sustainability reporting. Organizations must engage with employees, customers, investors, and affected communitiesto identify material sustainability matters.
* D. True-Benchmarking and gap analysishelp companies compare their sustainability performance againstESRS requirements, industry best practices, and peer organizations.
* E. False-Sustainability reporting goes beyond financial data collection.The ESRS requires environmental, social, and governance (ESG) disclosures, which include qualitative and quantitative indicators.
* F. True-Planning for external assuranceis critical under the CSRD mandate, aslimited assurance is required initially, progressing toreasonable assurance by 2028.
Key Steps in ESRS Report PreparationStep
Purpose
Internal Controls & Stakeholder Engagement
Ensure accuracy and transparency in reporting
Materiality Assessment
Identify key sustainability topics for disclosure
Benchmarking & Gap Analysis
Compare with industry standards and ESRS requirements
External Assurance Planning
Prepare for third-party validation of sustainability data
* Commission Delegated Regulation (EU) 2023/2772, Sections onMateriality Assessment, Internal Controls, and Assurance.
Official References:

NEW QUESTION # 24
Indicate whether the following statement is true or false.
External assurance not required for all information reported under ESRS 2 and the topical ESRS.

• A. True
• B. False

Answer: A

Explanation:
UnderESRS 2 and topical ESRS,external assurance is not required for all information reported. Instead, assurance requirements depend onspecific regulatory obligations and the phase-in periods set by the Corporate Sustainability Reporting Directive (CSRD).
* Limited Assurance Requirement Initially
* CSRDmandates limited assuranceover sustainability information at first, withreasonable 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 certainmetrics 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 disclosuresdo not require assurance if they are deemed immaterialbased on the materiality assessment.
* SMEs and first-time reportershavephased-in assurance requirements.
Thus,external assurance is not required for all ESRS 2 and topical ESRS disclosures, making the statementTrue.
* Commission Delegated Regulation (EU) 2023/2772
* Compilation Explanations January - November 2024
Official References:

NEW QUESTION # 25
Which of the following is included in the environmental section of the topical ESRS?

• A. Information about the organization's financial performance
• B. Disclosures relating to social impact and labor rights
• C. Disclosures relating to environmental objectives defined in the EU Taxonomy
• D. Data about corporate governance and board diversity

Answer: C

Explanation:
TheEnvironmental Sectionof the topical ESRS includes disclosure requirements covering environmental sustainability matters. This section specifically relates toenvironmental objectives as defined in the EU Taxonomy, ensuring alignment with broader European sustainability goals.
Thetopical 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 standardsalign with the environmental objectives of the EU Taxonomy Regulation(Regulation (EU)
2020/852) andrequire organizations to report on their material environmental impacts, risks, and opportunities (IROs).
* A. Social impact and labor rights:#Incorrect, as this belongs to theSocial (S) section(ESRS S1 - S4).
* B. Financial performance information:#Incorrect, as this is part offinancial reporting, not ESRS environmental disclosures.
* D. Corporate governance and board diversity:#Incorrect, as governance matters are covered under ESRS G1 Business Conduct.
* Commission Delegated Regulation (EU) 2023/2772
* Compilation Explanations January - November 2024
Why Other Options Are Incorrect:Official References:

NEW QUESTION # 26
How do the ESRS define stakeholders?

• A. Those who can influence or contribute to the undertaking.
• B. Those who can affect or be affected by the undertaking.
• C. Those who can support or benefit from the undertaking.

Answer: B

Explanation:
According to the European Sustainability Reporting Standards (ESRS) under the Commission Delegated Regulation (EU) 2023/2772, stakeholders are defined as individuals or groups who can affect or be affected by the undertaking. The ESRS distinguishes between two main groups of stakeholders:
* Affected stakeholders: These are individuals or groups whose interests are affected or could be affected - positively or negatively - by the undertaking's activities and its direct and indirect business relationships across its value chain.
* Users of sustainability statements: These include primary users of general-purpose financial reporting (e.g., existing and potential investors, lenders, and other creditors such as asset managers, credit institutions, and insurance undertakings) and other users, including the undertaking's business partners, trade unions, social partners, civil society and non-governmental organizations, governments, analysts, and academics.
Furthermore, engagement with affected stakeholders is a crucial aspect of the undertaking's ongoing due diligence process and sustainability materiality assessment. This involves identifying and assessing actual and potential negative impacts to inform the materiality assessment process for sustainability reporting.
Official References:
* Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34
/EU on sustainability reporting standards.
* ESRS 1: General Requirements, Section 3.1 (Stakeholders and their relevance to the materiality assessment process).

NEW QUESTION # 27
Which department is primarily responsible for providing employee-related data such as headcount, turnover, and health and safety statistics?

• A. Marketing
• B. Human Resources
• C. Health and Safety
• D. Compliance

Answer: B

NEW QUESTION # 28
What are the two categories of stakeholders identified in the ESRS?

• A. Internal and external stakeholders.
• B. Primary and secondary stakeholders.
• C. Affected stakeholders and users of sustainability statements.

Answer: C

Explanation:
The European Sustainability Reporting Standards (ESRS) categorize stakeholders intotwo main groups:
* Affected Stakeholders:
* These are individuals or groups whose interests are affected (positively or negatively) by the undertaking's activities and business relationships across its value chain.
* Examples include workers (own workforce and those in the value chain), affected communities, consumers, and end-users.
* The identification of affected stakeholders plays a crucial role in an organization's sustainability due diligence and materiality assessment processes.
* Users of Sustainability Statements:
* These are primary users of sustainability disclosures, including investors, lenders, and other creditors.
* Additional users include business partners, trade unions, civil society organizations, non- governmental organizations (NGOs), governments, analysts, and academics.
The ESRS framework emphasizes the importance ofengagement with affected stakeholdersas part of an undertaking's due diligence and materiality assessment process, ensuring that material impacts, risks, and opportunities are adequately identified and reported.
Official References:
* Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Section 3.1- Defines the two main groups of stakeholders.
* ESRS 2 SBM-2 (Interests and Views of Stakeholders)- Covers how affected stakeholders' views inform an undertaking's strategy.
* EFRAG Guidance on Stakeholder Engagement and Double Materiality- Reinforces the role of affected stakeholders in sustainability assessments.

NEW QUESTION # 29
Which of the following can organizations use to identify actual and potential IROs during Step B of the double materiality assessment process? Select all options that apply.

• A. Feedback from stakeholders
• B. The list of sustainability matters in ESRS 1 AR 16
• C. Due diligence processes
• D. Financial materiality thresholds

Answer: A,B,C

Explanation:
DuringStep Bof thedouble materiality assessment process, organizations mustidentify actual and potential impacts, risks, and opportunities (IROs). The ESRS framework recommends the following methods:
* A. The list of sustainability matters in ESRS 1 AR 16#
* ESRS 1 Application Requirement (AR) 16provides acomprehensive reference listof sustainability matters to consider when identifying IROs.
* This list includesenvironmental, social, and governance topicsaligned withEU sustainability objectives.
* C. Due diligence processes#
* ESRS requires organizations touse due diligence processesto identifynegative sustainability impacts.
* Due diligence aligns with frameworks such as theOECD Guidelines for Multinational Enterprisesand theUN Guiding Principles on Business and Human Rights.
* This ensures that potentialrisks and opportunitiesare assessed based oninternational sustainability standards.
* D. Feedback from stakeholders#
* Stakeholders, includingemployees, suppliers, customers, and affected communities, provide crucial insightsinto sustainability impacts.
* ESRSmandates engagement with affected stakeholdersas part of theIRO identification process.
* Financial materiality thresholds apply later in the process (Step C)when evaluating thefinancial impact of sustainability matters.
* Step Bfocuses only on identifying IROs, makingfinancial thresholds irrelevant at this stage.
Why is B. Financial materiality thresholds#incorrect?Conclusion:Organizations should usethe ESRS 1 AR 16 sustainability matters list, due diligence processes, and stakeholder feedbacktoidentify IROsin Step B of the double materiality assessment.Financial materiality thresholds do not apply in this step.
Official Commission Delegated Regulation (EU) 2023/2772, various EFRAG guidance documents, and CSRD-related references:
* Commission Delegated Regulation (EU) 2023/2772, ESRS 1, AR 16:List of Sustainability Matters for Identifying IROs.
* EFRAG Compilation of Explanations (January - July 2024): Confirmation thatdue diligence and stakeholder inputare part ofIRO identification.

NEW QUESTION # 30
Which of the following correctly fills the gaps in the paragraph below?
ESRS 2 IRO-1 mandates organizations to disclose their process to identify __________ and assess their materiality, including if and how consultation with __________ informed the outcome of the process.
Because most __________ arise from impacts, impact materiality is often the starting point for __________.

• A. impacts, risks, and opportunities; affected stakeholders; risks and opportunities; financial materiality.
• B. affected stakeholders; impacts, risks, and opportunities; financial materiality; risks and opportunities.
• C. financial materiality; affected stakeholders; impacts, risks, and opportunities; risks and opportunities.

Answer: A

Explanation:
ESRS 2 IRO-1 requires organizations to disclose their process for identifyingimpacts, risks, and opportunitiesand assess theirmateriality. This includes detailing whether and howaffected stakeholders were consulted during the process. Sincerisks and opportunitiestypically stem fromimpacts, the process of impact materiality assessmentserves as a natural starting point before evaluating theirfinancial materiality.
* Identification of Impacts, Risks, and Opportunities (IROs):
* Organizations must disclose their methodology for identifying materialimpacts, risks, and opportunities.
* These include bothactual and potential impactson people and the environment, considering short-, medium-, and long-term horizons.
* Consultation with Affected Stakeholders:
* ESRS 2 IRO-1 requires disclosure of whether and how theconsultation with affected stakeholdersinfluenced the identification of material sustainability matters.
* Stakeholder engagement is crucial in determining the scope and severity of sustainability impacts.
* Role of Impact Materiality:
* Impact materiality assessmentprecedes the evaluation of risks and opportunities.
* Since mostrisks and opportunitiesoriginate fromimpacts, impact materiality serves as the starting pointfor assessing theirfinancial materiality.
* Financial Materiality Evaluation:
* Financial materiality pertains to the extent that a sustainability matteraffects the undertaking's financial position, performance, cash flows, or cost of capital.
* It evaluates whether an impact or risk could reasonably be expected to have amaterial financial effecton the organization.
* "Impacts, risks, and opportunities"correctly defines the scope of ESRS 2 IRO-1.
* "Affected stakeholders"are explicitly referenced as a crucial element in the disclosure process.
* "Risks and opportunities"emerge from sustainability impacts, making impact materiality the logical starting point.
* "Financial materiality"is the final step, determining the financial significance of sustainability risks and opportunities.
Why is B the Correct Answer?Thus, the correct sequence isB: impacts, risks, and opportunities; affected stakeholders; risks and opportunities; financial materiality.
Official Commission Delegated Regulation (EU) 2023/2772, various EFRAG guidance documents, and CSRD-related references:
* Commission Delegated Regulation (EU) 2023/2772, Annex I: ESRS 2 IRO-1 materiality assessment requirements.
* EFRAG Compilation of Explanations (January - November 2024): Explanation of ESRS 2 IRO-1 and its link to impact materiality.

NEW QUESTION # 31
Which of the following elements is recommended for inclusion in the sustainability statement under ESRS 2, based on Appendix F of ESRS 1?

• A. A table summarizing financial performance
• B. Only sector-specific Disclosure Requirements
• C. A specific structure prescribed by the ESRS
• D. A list of Disclosure Requirements that have been complied with

Answer: D

Explanation:
UnderESRS 2 (Appendix F of ESRS 1), sustainability statements must follow astructured disclosure approach. The appendix provides guidance on the recommended format and elements to be included in the sustainability statement to ensureconsistency, comparability, and transparency.
* (C) A list of Disclosure Requirements that have been complied with:
* Organizations must provide aclear list of all ESRS disclosure requirementsthat they have reported on. This ensures that stakeholders can assess whether the company has complied with its materiality-based reporting obligations.
* The list must includepage numbers or referencesto the exact location of disclosures within the report.
* (A) A specific structure prescribed by the ESRS:
* While ESRS 1 provides arecommended structure, it isnot mandatory. Instead, companies are given flexibility to adapt the format to their reporting needs.
* (B) Only sector-specific Disclosure Requirements:
* The sustainability statement should coverboth general ESRS disclosures and sector-specific disclosures, not just sector-specific ones.
* (D) A table summarizing financial performance:
* Financial performance isnota core requirement of thesustainability statement. Instead, ESRS focuses onsustainability-related disclosuresthat impact financial performance but does not mandate a direct financial summary within the sustainability statement.
* Commission Delegated Regulation (EU) 2023/2772, ESRS 2 (Appendix F of ESRS 1)- Outlines the format and elements of the sustainability statement.
* EFRAG Compilation Explanations (January - November 2024)- Provides insights into structuring sustainability statements under ESRS.
Key Requirements for ESRS 2 Sustainability StatementIncorrect OptionsOfficial References:Thus, the correct answer isC. A list of Disclosure Requirements that have been complied with.

NEW QUESTION # 32
Indicate whether the following statement is true or false.
Entity-specific disclosures are required if a material sustainability matter is not covered or sufficiently detailed in the ESRS.

• A. True
• B. False

Answer: A

Explanation:
Entity-specific disclosures are required if a material sustainability matter is not covered or sufficiently detailed in the ESRS. According toESRS 1, paragraph 11, if an undertaking identifies an impact, risk, or opportunity that isnot adequately coveredby an ESRS but ismaterial due to itsspecific facts and circumstances, it must provideadditional entity-specific disclosures. This ensures that users of sustainability reports receive relevant and complete information.
* 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 companiesmustdisclose 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 theminimum disclosure requirementsthat apply when companies make entity-specific disclosures related to governance, strategy, impacts, risks, and opportunity management.
Key Provisions from ESRS:Thus, if a sustainability matter is deemedmaterialand is not sufficiently addressed by ESRS,entity-specific disclosures are mandatory.
Official References:
* Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Paragraphs 11 and 30.
* ESRS Implementation Q&A Platform - Compilation of Explanations January - November 2024.

NEW QUESTION # 33
Which of the following correctly fills the gaps in the paragraph below?
The first set of the ESRS consist of several standards: The first group includes __________ General requirements and __________ General disclosures. These standards apply regardless of the specific sustainability topic being reported.
The next group includes ten __________ that cover various topics across the three dimensions of sustainable development. For example, ESRS E1 focuses on the environmental dimension, particularly climate change.
Finally, the last group includes the __________ which are currently under development.

• A. ESRS 2; ESRS 1; topical standards; sector-specific standards
• B. ESRS 2; topical standards; sector-specific standards; ESRS 1
• C. ESRS 1; ESRS 2; topical standards; sector-specific standards
• D. topical standards; ESRS 2; ESRS 1; sector-specific standards

Answer: C

Explanation:
The ESRS (European Sustainability Reporting Standards) framework consists of three primary categories of standards:
* ESRS 1 (General Requirements):
* ESRS 1 sets out thefundamental principlesand 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 thedouble materiality principleas the basis for sustainability disclosures.
* ESRS 2 (General Disclosures):
* ESRS 2 outlines thecore disclosure requirementsapplicable 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 undertakingsregardless of the specific sustainability topics being reported.
* Topical Standards:
* The ESRS framework includes tentopical standardscovering 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 providespecific requirementson sustainability matters, complementing the general disclosure requirements in ESRS 2.
* Sector-Specific Standards:
* Sector-specific ESRS arecurrently under development.
* These will address sustainability mattersspecific to different industries, ensuring that sectoral nuances are properly considered.
* They aim tofill gaps not sufficiently coveredby the topical standards by defining industry- specific impacts, risks, and opportunities.
* 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.
Why is C. ESRS 1; ESRS 2; topical standards; sector-specific standards the correct answer?Thus, the correct order aligns with theofficial structureof the ESRS framework as mandated inCommission 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.

NEW QUESTION # 34
Indicate whether the following statement is true or false.
Policymakers and regulators worldwide are increasingly mandating limited assurance for sustainability reporting in Europe and mandatory assurance in all Asian and African countries.

• A. True
• B. False

Answer: B

Explanation:
The statement that "Policymakers and regulators worldwide are increasingly mandating limited assurance for sustainability reporting in Europe and mandatory assurance in all Asian and African countries" isfalsefor the following reasons:
* Limited Assurance in Europe
* Under theCorporate Sustainability Reporting Directive (CSRD), theEuropean Union (EU) is progressively implementing mandatory assurance for sustainability reporting, but it is starting with limited assurancebefore transitioning toreasonable assuranceby 2028.
* TheCommittee of European Auditing Oversight Bodies (CEAOB)has issuednon-binding guidelines on limited assuranceto harmonize the approach across EU member states.
* No Universal Mandatory Assurance in Asia and Africa
* Sustainability assurancevaries by countryinAsia and Africa, with some jurisdictions adopting voluntaryorlimitedrequirements rather thanmandatory assurance.
* TheEU approachis influencing global discussions, butthere is no blanket requirementfor full mandatory assurance acrossallAsian and African countries.
* While certainAsian countries (e.g., Japan, Singapore, China, and India)are enhancing their sustainability reporting frameworks, assurance requirements remaindiverse and sector- dependent.
* InAfrica, sustainability reporting is growing, especially in South Africa underKing IV principles
, but assurance isnot uniformly mandatoryacross the continent.
* Limited assurance is currently being phased in across the EU, but not yet fully mandated at the reasonable assurance level.
* There is no global requirement for mandatory assurance across all Asian and African countries.
* Therefore, the statement isfalse.
Conclusion:Official Commission Delegated Regulation (EU) 2023/2772, various EFRAG guidance documents, and CSRD-related references:
* EU CSRD Recital 60: Roadmap for assurance from limited to reasonable.
* CEAOB Limited Assurance Guidelines (September 2024).

NEW QUESTION # 35
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