Eliminate Risk of Failure with GRI ESRS-Professional Exam Dumps

Preparing an ESRS report involves multiple key steps to ensure compliance with CSRD requirements. Below is an evaluation of each option:

A . True -- Internal controls and stakeholder engagement are critical for ensuring accurate sustainability reporting. Stakeholders play a role in materiality assessments and governance structures.

B . True -- Materiality assessment is essential to determine which sustainability matters are most relevant for disclosure. The ESRS framework requires organizations to report only on material sustainability topics.

C . False -- Stakeholder opinions are crucial in sustainability reporting. Organizations must engage with employees, customers, investors, and affected communities to identify material sustainability matters.

D . True -- Benchmarking and gap analysis help companies compare their sustainability performance against ESRS 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 assurance is critical under the CSRD mandate, as limited assurance is required initially, progressing to reasonable assurance by 2028.

Key Steps in ESRS Report Preparation

Step

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

Official Reference:

Commission Delegated Regulation (EU) 2023/2772, Sections on Materiality Assessment, Internal Controls, and Assurance.

The Corporate Sustainability Reporting Directive (CSRD) includes specific reporting mandates that organizations must comply with. Below is an evaluation of each option:

A . True -- The CSRD requires organizations to conduct a double materiality assessment, considering both financial materiality (impact on the company's financial position) and impact materiality (the company's impact on the environment and society).

B . True -- Organizations reporting under the CSRD must follow a specific reporting format, which includes structured disclosures using European Sustainability Reporting Standards (ESRS).

C . False -- The CSRD applies to both EU and non-EU companies that have operations in the EU and meet the reporting threshold criteria. Non-EU companies generating more than 150 million in annual turnover in the EU and having at least one EU-based subsidiary or branch are subject to CSRD requirements.

D . True -- The CSRD is interlinked with other EU legislation, including the EU Taxonomy Regulation and the Sustainable Finance Disclosure Regulation (SFDR), ensuring companies align with broader EU sustainability goals.

E . False -- Organizations must report on value chain information as part of the impact, risk, and opportunity (IRO) management process within the ESRS framework.

F . False -- The CSRD mandates external assurance for sustainability reports, starting with limited assurance and progressing toward reasonable assurance in the coming years.

Official Reference:

Commission Delegated Regulation (EU) 2023/2772, Sections on Double Materiality, Reporting Format, and Value Chain Information.

EU Taxonomy Regulation & SFDR -- Linkages with CSRD.

The double materiality assessment involves identifying sustainability matters that are material either from:

An impact perspective (the organization's effects on people and the environment).

A financial perspective (how sustainability matters affect the organization financially).

The correct steps in conducting this assessment include:

(A) Comparing identified material topics with ESRS 1 AR 16 -- This ensures alignment with predefined sustainability matters in ESRS.

(C) Using ESRS 2 IRO-1 -- This disclosure requirement mandates companies to report on their methodology for identifying impacts, risks, and opportunities.

(D) Following SBM-3 of ESRS 2 -- This section provides requirements for disclosing the material impacts, risks, and opportunities identified through the materiality assessment.

Why the other options are incorrect:

(B) False: Entity-specific disclosures must cover all material sustainability topics, even those not explicitly covered in ESRS.

(E) False: Both financial and impact materiality must be considered (double materiality), not just financial materiality.

(F) False: Double materiality assessments are mandatory for all organizations reporting under ESRS.

Commission Delegated Regulation (EU) 2023/2772, Section 3.3 on Double Materiality

EFRAG Compilation on Double Materiality Assessments, providing step-by-step guidance on ESRS compliance

Understanding Impact and Financial Materiality under ESRS

The ESRS framework is based on double materiality, which comprises:

Impact Materiality -- This relates to the organization's potential positive or negative impacts on people or the environment, irrespective of whether these impacts translate into financial effects.

Financial Materiality -- This refers to sustainability matters that affect the company's financial position, including risks and opportunities that influence financial outcomes over the short, medium, or long term.

Why the other options are incorrect:

(A) False: A sustainability topic can be material even if it does not directly affect financial performance; it may still be impact material.

(D) False: Impact and financial materiality are equally important under ESRS. Neither is prioritized over the other.

(E) False: The ESRS process generally begins with impact materiality, not financial materiality.

Commission Delegated Regulation (EU) 2023/2772, Section 3.3 on Double Materiality

EFRAG Materiality Guidance on ESRS, which provides methodologies for assessing impact and financial materiality

Organizations should report on sustainability for several reasons, including transparency, stakeholder expectations, and competitive advantage. Below is the evaluation of each option:

A . True -- Reporting on sustainability demonstrates transparency and accountability, allowing companies to disclose their environmental, social, and governance (ESG) impacts.

B . True -- Stakeholders, including investors, customers, and regulators, increasingly demand sustainability reporting to assess the long-term viability of a company.

C . False -- While sustainability reporting may contribute to long-term financial gains, it does not guarantee immediate financial benefits.

D . True -- Companies with strong sustainability performance often enjoy enhanced brand value and competitive advantage, attracting investors and customers who prefer sustainable businesses.

Why Sustainability Reporting Matters

Benefit

Impact on Organization

Transparency & Accountability

Builds trust with investors, regulators, and the public

Stakeholder Expectations

Meets regulatory and customer expectations for ESG disclosures

Brand & Competitive Advantage

Companies with strong ESG performance are more attractive to investors

Regulatory Compliance

Helps meet CSRD and ESRS disclosure obligations

Official Reference:

CSRD & ESRS Guidance (2024) -- Key Sustainability Reporting Benefits.

EU Platform on Sustainable Finance Report (2025) -- Stakeholder Expectations & Competitive Advantage.