Activedumpsnet Logo
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.
True
False
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-bindingguidelinesonlimited 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).
Which department is primarily responsible for providing employee-related data such as headcount, turnover, and health and safety statistics?
Human Resources
Compliance
Health and Safety
Marketing
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:
Indicate whether the following statement is true or false.
The EU Taxonomy and ESRS digital taxonomy serve the same purpose in sustainability reporting.
True
False
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
What features define a digital reporting platform? Select all that apply.
Structured data formats
Manual data entry processes
Interactive dashboards
Real-time updates and compliance tools
Adigital reporting platformunder ESRS is designed to enhance the efficiency and accuracy of sustainability disclosures. It must enable seamless reporting and compliance monitoring through advanced digital features. The defining elements include:
(A) Structured data formats
Digital platforms must support structured formats likeXBRL (eXtensible Business Reporting Language), ensuringmachine-readability and interoperabilitywith financial reporting standards.
(C) Interactive dashboards
Platforms often providevisualization tools and dashboardsto facilitate analysis and comparison of sustainability data across different periods and entities.
(D) Real-time updates and compliance tools
Digital reporting solutions should offerreal-time data integrationto enable ongoing compliance tracking and alignment withevolving regulatory requirements.
(B) Manual data entry processes
Manual entry isnot a characteristicof a digital reporting platform. Instead, digital platforms prioritizeautomation, integration, and structured data processingto improve efficiency and reduce errors.
Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Section 8.1 & 9.2– Establishes digitalization and connectivity requirements for sustainability reporting.
EFRAG Digital Reporting Guidelines (2024)– Defines structured data standards and compliance automation in ESRS reporting.
Incorrect Option:Official References:
Which statements about Inline XBRL are TRUE?
Select all that apply.
It is required under the CSRD for sustainability reporting
It only applies to narrative disclosures, not numerical data
It makes reports both human-readable and machine-readable
It ensures that tags are embedded within a visually clear format
Inline XBRL (iXBRL)is the digital reporting format required under theCorporate Sustainability Reporting Directive (CSRD)to ensure standardized and machine-readable sustainability reporting.
It is required under CSRD for sustainability reporting
TheCSRD mandates the use of Inline XBRLfor sustainability reports, ensuring digital tagging for structured data submission, making informationeasier 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, allowingstructured 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, ensuringboth usability and compliance with digital reporting requirements.
✅(C) is correct
It ensures that tags are embedded within a visually clear format
Correct. TheInline 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 XBRLis 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.
Commission Delegated Regulation (EU) 2023/2772
Compilation Explanations January - July 2024
Official References:
Which of the following elements is recommended for inclusion in the sustainability statement under ESRS 2, based on Appendix F of ESRS 1?
A specific structure prescribed by the ESRS
Only sector-specific Disclosure Requirements
A list of Disclosure Requirements that have been complied with
A table summarizing financial performance
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 itsmateriality-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.
Which of the following best describes the purpose of Step A in the double materiality assessment process?
Identify specific disclosure requirements to report.
Conduct a financial materiality assessment.
Understand the organization's context, activities, and stakeholders.
Report the outcomes of the materiality assessment.
Step A in thedouble materiality assessment processis theinitial stagewhere an organization establishes a foundational understanding of itsbusiness context, activities, and stakeholder relationships. This step is critical in identifying how the entity interacts with environmental, social, and governance (ESG) matters and lays the groundwork for further impact and financial materiality assessments.
Thedouble materiality conceptin the ESRS framework requires organizations to evaluate both:
Impact materiality– How an organization’s activities impact people and the environment.
Financial materiality– How sustainability matters influence the organization's financial position, performance, and cash flows.
Identifying the business environment:Understanding industry-specific sustainability challenges, regulatory requirements, and stakeholder expectations.
Recognizing affected stakeholders:Engaging internal and external stakeholders to determine which sustainability matters are relevant.
Defining dependencies and risks:Evaluating the organization’s dependencies on natural, social, and human capital, and how these can influence business outcomes.
Understanding sector and geographical relevance:Assessing which sustainability issues are most significant based on where the company operates.
Key Aspects of Step A in Double Materiality Assessment:Step A does not yet involve selecting specific disclosure requirements (Step B) or conducting a financial materiality assessment (Step C). Instead, it provides thecontextual frameworknecessary for subsequent steps in the materiality process.
Commission Delegated Regulation (EU) 2023/2772, ESRS 1, Section 3.1– Defines stakeholders' role in materiality assessment.
EFRAG Compilation Explanations January - November 2024– Provides guidance on applying double materiality and the importance of Step A.
EFRAG IG 1 Materiality Assessment, Chapter 2.2– Outlines Step A as the process of understanding business activities, stakeholders, and sustainability context.
Official References:Thus, the correct answer isC. Understand the organization's context, activities, and stakeholders.
What is the PRIMARY purpose of creating a cross-departmental taskforce for CSRD compliance?
To create a hierarchical structure that limits communication between departments
To ensure coordinated efforts, meet reporting timelines, and manage sustainability reporting responsibilities across the organization
To reduce the overall workload by assigning all tasks to a single department
To minimize interaction between different organizational departments
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) togather 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.
Which of the following are key steps in preparing to develop an ESRS report?
Select all that apply.
Setting up internal controls and stakeholder engagement processes.
Preparing for materiality assessment.
Disregarding stakeholder opinions.
Benchmarking and gap analysis.
Focusing solely on financial data collection.
Planning for external assurance.
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 onmaterialsustainability topics.
C. False–Stakeholder opinions are crucialin sustainability reporting. Organizations must engage withemployees, 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 requiresenvironmental, 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:
What are the two categories of stakeholders identified in the ESRS?
Affected stakeholders and users of sustainability statements.
Primary and secondary stakeholders.
Internal and external stakeholders.
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.
Which of the following is true about setting thresholds for financial materiality under the ESRS?
Organizations should only use monetary thresholds, such as revenue or costs.
Financial materiality thresholds are based on the likelihood of occurrence and the potential magnitude of financial effects.
Reputational risks cannot be considered financially material.
Thresholds should focus exclusively on the short-term time horizon.
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
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.
The list of sustainability matters in ESRS 1 AR 16
Financial materiality thresholds
Due diligence processes
Feedback from stakeholders
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, providecrucial 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.