Free and Premium GRI ESRS-Professional Dumps Questions Answers

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 beexplicitly identifiedin 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 meetthe same technical digitalization standardsas 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 thesame level of assuranceas the sustainability statement itself, ensuring reliability and accuracy​.

(B) It can be published later than the management report.

ESRSdoes not allowreferenced information to be published after the management report. It must be available at the same time or earlier to maintain the coherence of disclosures​.

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​.

Incorrect Option:Official References:Thus, the correct answers areA, C, and D.

2023/2772, various EFRAG guidance documents, and reports related to CSRD, ESRS, stakeholder engagement, double materiality, external assurance, and digital reporting Study guide References at the end of each question

Under the ESRS framework,employee-related datasuch asheadcount, turnover, and health and safety statisticsare typically the responsibility of theHuman Resources (HR) department. HR is responsible for managing workforce metrics, diversity, inclusion, hiring, terminations, and employee well-being, including health and safety programs.

WhileHealth and Safety (H&S) teamsmay contribute data related to occupational safety and health incidents, the responsibility foraggregating and reportingon overall workforce statistics lies with HR. TheCompliance departmentensures legal and regulatory adherence but does not maintain core employee records, whileMarketinghas no role in employee-related data reporting.

ESRS S1-6:Characteristics of the undertaking’s employees, requiring disclosure of total headcount and workforce breakdown​.

ESRS S1-14:Health and Safety Metrics, detailing occupational safety measures, incidents, and employee well-being programs​.

EFRAG Implementation Guidance on Workforce Reporting, which confirms HR as the responsible entity for employee data aggregation​.

ESRS References:

Impact materiality is indeed considered thestarting pointfor thedouble materiality assessmentin the ESRS. The reason is that material impacts on sustainability matters cangenerate financial risks and opportunitiesin the future. TheESRS frameworkfollows this structure because:

Interrelation Between Impact and Financial Materiality

Double materiality includestwo dimensions:a)Impact materiality(how the company affects people and the environment).b)Financial materiality(how sustainability matters affect the company’s financial performance).

Impact materiality assessments oftenprecedefinancial materiality because many sustainability issues initially manifest asexternal environmental and social impactsbefore affecting the company’sfinancial results​.

Regulatory Confirmation of Impact as the Starting Point

According toESRS 1, section 3.3, impact materiality is typically assessedfirst, unless afinancial risk or opportunity exists independentlyof an impact​.

A sustainability mattermay become financially materialover time due to regulatory changes, evolving market expectations, or direct financial consequences.

Illustration of the Double Materiality Process

Example: A company engaged inhigh carbon emissionsmight initially consider this animpact materiality issue(environmental harm). However,increased carbon pricing, regulatory changes, and shifting investor preferencescan latertransform this into a financial materiality issue.

Conclusion:Sinceimpact materiality serves as a precursorto financial materiality in most cases, the statement istrue.

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

Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Section 3.3:Double Materiality Framework​.

EFRAG Compilation of Explanations (January - July 2024): Confirmation that impact materiality assessment is the typicalentry point​.

TheESRS Taxonomyacts as aframeworkfor tagging sustainability disclosures, ensuring data is structured, consistent, and comparable across organizations.

TheCSRD requires sustainability information to be reported in a digitally accessible format, making it available for both people and machines.

Under the CSRD, sustainability reports will eventually be uploaded to theEuropean Single Access Point (ESAP), centralizing public financial and non-financial information across the EU​.

ESRS as a "framework"– The ESRS taxonomy defines a structure that allows sustainability data to be categorized and tagged effectively​.

"Digitally accessible format"– The CSRD mandates reporting inmachine-readable formatssuch asXBRLto improve transparency and comparability​.

European Single Access Point (ESAP)– ESAP will serve as thecentralized EU platformfor sustainability and financial disclosures​.

Correct Sentence Completion:Explanation of the Selected Answer:References:

EU Taxonomy Regulation and CSRD Reporting Structure​

EFRAG Explanation on ESRS Digital Reporting​

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 ofdouble materialityembedded 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 integratesbiodiversity 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.

Thesilent stakeholderconcept reinforces theduty of carethat organizations hold in assessing and mitigating their impacts on biodiversity, land use, pollution, and natural resources. This aligns with theUnited Nations Sustainable Development Goals (SDGs)and theEU Biodiversity Strategy for 2030, both of which emphasize the protection and restoration of natural ecosystems​.

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​.

Official References:This confirms that the statement istrueunder ESRS standards.

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​

TheEU Taxonomyand theESRS digital taxonomyserve different purposes in sustainability reporting:

EU Taxonomyis a classification system that identifiesenvironmentally sustainable economic activitiesand establishes criteria for determining their contribution to environmental objectives. It is primarily used to guide investment decisions and financial disclosures​.

ESRS Digital Taxonomyis a structureddigital frameworkthat ensures sustainability disclosures aremachine-readable, standardized, and comparableunder theCorporate Sustainability Reporting Directive (CSRD)​.

Key Differences:Aspect

EU Taxonomy

ESRS Digital Taxonomy

Purpose

Classifies sustainable economic activities

Enables structured digital sustainability reporting

Scope

Environmental focus on investments & economic activities

Comprehensive reporting across environmental, social, and governance (ESG) areas

Users

Financial institutions, investors

Reporting entities, auditors, regulators

Regulation

UnderEU Taxonomy Regulation (2020/852)

UnderCSRD (Directive 2022/2464/EU)

References:

EU Platform on Sustainable Finance Report: Simplifying the EU Taxonomy​

Commission Delegated Regulation (EU) 2023/2772​

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 underESRS G1 Business Conduct​.

Commission Delegated Regulation (EU) 2023/2772​

Compilation Explanations January - November 2024​

Why Other Options Are Incorrect:Official References:

2023/2772, various EFRAG guidance documents, and reports related to CSRD, ESRS, stakeholder engagement, double materiality, external assurance, and digital reporting Study guide References at the end of each question

Under the ESRS framework, effectiveinternal controlsfor assurance purposes must meet key characteristics to ensure reliability, traceability, and auditability.

(A) Documentation & Implementation:Internal controls must be formally documented, implemented as per the designated schedule, and consistently applied​.

(C) Testability by External Assurance Providers:Assurance providers must be able to verify the controls, test their effectiveness, and ensure compliance with CSRD assurance requirements​.

(B) Same Staff Performing & Assuring the Control:A fundamental principle of internal control is theseparation of dutiesto avoid conflicts of interest. The control must be performed by one team and assured independently​.

(D) No Need for Documentation:Proper documentation ismandatoryfor internal controls to enable traceability, testing, and regulatory compliance​.

Commission Delegated Regulation (EU) 2023/2772, GOV-5:Risk management and internal controls over sustainability reporting, highlighting the necessity of internal control mechanisms​.

EFRAG Assurance Guidelines:Stipulating that documented controls must be verifiable and tested for external assurance​.

Correct Options Explained:Incorrect Options Explained:ESRS References:

TheFacilities Management (FM) departmentis primarily responsible for providing information on building energy use and the environmental performance of physical infrastructure.

Key responsibilities include:

Energy management: Tracking energy consumption and implementing efficiency measures.

Sustainability initiatives: Managing green building certifications, renewable energy installations, and environmental compliance.

Infrastructure monitoring: Overseeing heating, ventilation, and air conditioning (HVAC) systems, lighting efficiency, and water usage.

While theOperationsdepartment may use energy-related data for broader business functions, Facilities Management specializes inmonitoring and improving building performancefrom an environmental perspective​.

ESRS E1 – Climate Change, Disclosure Requirement E1-5- Specifies requirements for energy consumption and environmental impacts of buildings​.

EFRAG Guidance on Environmental Performance and Building Energy Use- Confirms that FM is responsible for infrastructure sustainability monitoring​.

Official References:

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).

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 Regulationand 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: