ESG reporting is the systematic disclosure of a company’s environmental, social and governance impact using standardised metrics — in the EU, governed by the CSRD directive and the ESRS standards, covering an increasingly wide circle of companies, including many not previously subject to any non-financial reporting requirement.
Quick Overview
What you’ll learn from this article:
- What double materiality is — the core concept behind the CSRD
- How the ESRS standards are structured and which areas they cover
- Where to actually start preparing for ESG reporting as a company
- A plan for the first steps before formal reporting obligations apply
Who this article is for: CFOs and COOs preparing their company for ESG reporting obligations, sustainability managers, consultants supporting clients through CSRD implementation.
Reading time: 7 minutes
Double materiality: the foundation of CSRD reporting
The Corporate Sustainability Reporting Directive (CSRD) introduces the principle of double materiality — a company reports both on how ESG issues affect its own financial performance (financial materiality) and on the impact the company has on the environment and society (impact materiality). This sets the CSRD apart from earlier, narrower non-financial reporting obligations, which focused mainly on financial risk tied to ESG issues while ignoring the reverse direction of impact.
How the ESRS standards are structured
| ESRS category | What it covers | Example metrics |
|---|---|---|
| Environment (E1-E5) | Climate, pollution, water, biodiversity, circular economy | Greenhouse gas emissions (scopes 1, 2, 3), water consumption |
| Social (S1-S4) | Own workforce, workers in the value chain, communities, consumers | Workforce composition, pay, working conditions in the supply chain |
| Governance (G1) | Business conduct, management structure, ethics | Anti-corruption policies, ESG oversight structure |
EFRAG, the body responsible for developing the ESRS standards on behalf of the European Commission, designs the standards so that a company only reports the metrics that follow from its own materiality assessment — a small manufacturer without a significant international supply chain doesn’t need to fill in every field designed for a large industrial group.
Where to start preparing for ESG reporting step by step
- Check when, and whether, the CSRD obligation applies to your company — scope and implementation deadlines vary depending on company size, turnover, and whether it’s publicly listed.
- Run a double-materiality assessment — identify which ESRS topics are financially or impact-material to your business, instead of trying to report on everything at once.
- Map what data you already collect versus what’s missing — many companies already have partial data (energy consumption, workforce composition), but scattered across different systems with no standardised format.
- Build a data-collection process for ESG going forward, before you start writing the first report — a one-off data pull for a single report without a lasting process means repeating the same costly work every year.
- Bring in an auditor or consultant with CSRD experience early, to verify the materiality assessment’s assumptions before a misinterpretation affects the whole data-collection process.
A common mistake companies make when starting ESG reporting preparation is delaying action until right before the formal deadline — the double-materiality assessment and building a data-collection process realistically take several months, and companies that start too late end up with a report based on estimates rather than properly collected data. A second common mistake is treating ESG reporting as a task solely for the sustainability department — the data needed for the report comes from finance, HR, the supply chain and operations, so a process that doesn’t involve those departments from the start runs into delays with every subsequent reporting cycle.
Read Also
- GreenOps: Sustainable IT in ESG Training
- Business Simulations in ESG Training: Gamified Sustainable Decisions
Develop Your Skills
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Frequently Asked Questions (FAQ)
How does double materiality differ from ordinary ESG risk analysis?
Ordinary ESG risk analysis only looks at how environmental or social issues might affect a company’s financial performance. Double materiality adds a second direction — how the company itself affects the environment and society — even when that impact doesn’t translate directly into a short-term financial result.
Do small companies need to report on every ESRS standard?
No — the scope of reporting follows from a specific company’s materiality assessment, and the standards provide simplified requirements for smaller entities. A company only reports on the topics that its double-materiality assessment identified as genuinely material to its business.
How long does preparing a first ESG report take?
It depends on how mature a company’s data-collection processes already are, but the double-materiality assessment and building the data process usually take several months of work before you can even start writing the report itself. Companies with existing non-financial reporting processes move through this stage faster.
Does ESG reporting only apply to large corporations?
The CSRD’s scope is gradually expanding to cover smaller companies, including many not previously subject to any non-financial reporting requirement. It’s worth checking the current thresholds and deadlines for your company’s size and legal form, rather than assuming the topic only concerns the largest entities.
Is ESG data subject to external audit the way financial data is?
Yes — the CSRD introduces a mandatory assurance requirement for the sustainability report by an independent auditor, starting with limited assurance and moving toward a higher assurance level in later years. That’s a significant change from earlier, voluntary ESG reports that companies published with no external verification of their accuracy at all.