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
The Answer Is:
A, C, DExplanation:
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:
Indicate whether the following statement is true or false.
Nature is recognized as a "silent stakeholder" in the ESRS because it cannot voice concerns directly but is essential to sustainability contexts.
True
False
The Answer Is:
AExplanation:
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.
Which of the following statements about ESRS 2 are correct? Select all that apply.
ESRS 2 is a sector-agnostic, cross-cutting standard applicable to all organizations.
Reporting organizations don't have to address all disclosure requirements in ESRS 2.
Certain disclosure requirements in ESRS 2 are subject to a phase-in period.
The Answer Is:
A, CExplanation:
ESRS 2 is a cross-cutting, sector-agnostic standard (Option A)
ESRS 2 appliesto all undertakings, regardless of sector or industry.
It establishesgeneral disclosuresthat cover governance, strategy, materiality, risks, and sustainability metrics.
Certain ESRS 2 disclosure requirements are subject to a phase-in period (Option C)
Some disclosure requirements have been phased infor companies with fewer than 750 employees, allowing gradual adoption.
For instance, disclosures related tobiodiversity (ESRS E4), workforce (ESRS S1-S4), and pollution (ESRS E2)can beomitted for the first 1-2 years, depending on company size.
B. Reporting organizations don’t have to address all disclosure requirements in ESRS 2
This is incorrect becauseESRS 2 disclosures are mandatory for all reporting organizations. Only topical ESRS requirements depend on materiality assessments.
Commission Delegated Regulation (EU) 2023/2772, ESRS 2- Defines ESRS 2 as a sector-agnostic, cross-cutting standard.
EFRAG Compilation Explanations (January–July 2024), Appendix C- Lists ESRS 2 disclosures with phase-in provisions.
Incorrect Answer:Official References:
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.
The Answer Is:
CExplanation:
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.
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.
The Answer Is:
A, B, D, FExplanation:
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:
Which of the following statements best captures the shift introduced by the CSRD compared to the NFRD?
The CSRD maintains the NFRD's voluntary approach to assurance, allowing organizations to select their own providers and define the assurance scope.
The CSRD eliminates the need for sustainability reporting assurance entirely, simplifying compliance for organizations.
The CSRD introduces mandatory assurance for ESRS reporting, with defined requirements for scope, standards, and providers.
The Answer Is:
CExplanation:
TheCorporate Sustainability Reporting Directive (CSRD)significantly strengthens sustainability reporting and assurance requirements compared to theNon-Financial Reporting Directive (NFRD). The key shift introduced by CSRD is themandatory assurance of sustainability reports, which includesdefined standards, scope, and providers.
Key Differences Between CSRD and NFRD:Feature
NFRD (Previous Directive)
CSRD (New Directive)
Assurance Requirement
Voluntary
Mandatory
Who Can Provide Assurance?
Organizations could choose any provider
Member States decide between statutory auditors and independent assurance providers
Assurance Scope
Limited guidance
Defined ESRS-based scope
Assurance Level
No formal requirement
Limited assurance initially, transitioning to reasonable assurance by 2028
Reporting Scope
Limited to large public-interest entities
Expanded to all large companies and listed SMEs
Disclosure Framework
High-level requirements
Detailed ESRS framework with sector-specific standards
Mandatory Assurance:
Unlike the NFRD, the CSRDrequires sustainability reports to be assuredby an independent external provider.
The assurance process followsESRS standardsto ensure consistency.
Defined Standards and Scope:
CSRD specifies thescope of assurance, focusing onmaterial sustainability disclosures, governance, andrisk disclosures.
TheEuropean Commissionis developing a standard methodology for assurance.
Transition to Reasonable Assurance:
Initially,limited assuranceis required.
ByOctober 2028, the EU aims to transition toreasonable assurance, aligning sustainability assurance with financial audits.
Option A: Incorrect – TheCSRD makes assurance mandatory, whereas theNFRD had a voluntary approach.
Option B: Incorrect – TheCSRD does not eliminate sustainability reporting assurance; it makes it morestructured and rigorous.
Key Provisions of the CSRD:Why Other Answers Are Incorrect:Thus, thecorrect answer is C:The CSRD introduces mandatory assurance for ESRS reporting, with defined requirements for scope, standards, and providers.
Official References:
CSRD Directive (EU) 2022/2464– Assurance Provisions.
EU Platform on Sustainable Finance Report (February 2025)– Assurance and Compliance Guidelines.
CEAOB Guidelines on Assurance of Sustainability Reporting (2024)– Limited Assurance Transitioning to Reasonable Assurance.
How do the ESRS define stakeholders?
Those who can influence or contribute to the undertaking.
Those who can support or benefit from the undertaking.
Those who can affect or be affected by the undertaking.
The Answer Is:
CExplanation:
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).
Which of the following correctly fills the gaps in the paragraph below?
Under the ESRS, engagement with affected stakeholders is a core element of __________. The outcome of the due diligence process informs __________. The ESRS encourage further engagement with stakeholders to collect their input and feedback on the organization's conclusions regarding __________.
the materiality assessment; the material impacts, risks, and opportunities; due diligence
the materiality assessment; due diligence; the material impacts, risks, and opportunities
due diligence; the materiality assessment; the material impacts, risks, and opportunities
the material impacts, risks, and opportunities; due diligence; the materiality assessment
The Answer Is:
CExplanation:
Under the ESRS, engagement with affected stakeholders is a core element of due diligence. The outcome of the due diligence process informs the materiality assessment. The ESRS encourage further engagement with stakeholders to collect their input and feedback on the organization's conclusions regarding the material impacts, risks, and opportunities.
This sequence is supported by the official text of Commission Delegated Regulation (EU) 2023/2772 and various ESRS-related documents. The standard emphasizes due diligence as astarting point for the materiality assessment process. The assessment then determines the organization's material impacts, risks, and opportunities, which is crucial for effective stakeholder engagement.
Due Diligence:The ESRS process starts with due diligence, as outlined in the Commission Delegated Regulation (EU) 2023/2772, to identify relevant sustainability matters and affected stakeholders.
Materiality Assessment:The findings from the due diligence process are then used to inform the materiality assessment, as discussed in EFRAG's guidance documents.
Material Impacts, Risks, and Opportunities:Finally, the organization engages with stakeholders to review and refine its conclusions about material impacts, risks, and opportunities, as per the ESRS requirements.
References:
Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU
EFRAG Guidance on Materiality Assessment in ESRS
ESRS Due Diligence Framework, as outlined in Compilation Explanations and Mapping Sustainability Matters with Disclosure Requirements
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Why should organizations consider reporting on sustainability? Select all options that apply.
Reporting demonstrates transparency and accountability by disclosing environmental, social, and economic impacts.
Stakeholders increasingly expect organizations to report on their sustainability performance.
Reporting guarantees immediate financial gains for the organization.
Demonstrating sustainability performance can enhance brand value and provide a competitive advantage.
The Answer Is:
A, B, DExplanation:
Organizations should report on sustainability for several reasons, includingtransparency, stakeholder expectations, and competitive advantage. Below is the evaluation of each option:
A. True– Reporting on sustainabilitydemonstrates transparency and accountability, allowing companies to disclose theirenvironmental, social, and governance (ESG) impacts.
B. True–Stakeholders, including investors, customers, and regulators,increasingly demand sustainability reportingto assess the long-term viability of a company.
C. False– While sustainability reporting may contribute tolong-term financial gains, it doesnot guarantee immediate financial benefits.
D. True– Companies withstrong sustainability performanceoften enjoyenhanced brand value and competitive advantage, attracting investors and customers who prefer sustainable businesses.
Why Sustainability Reporting MattersBenefit
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
CSRD & ESRS Guidance (2024)– Key Sustainability Reporting Benefits.
EU Platform on Sustainable Finance Report (2025)– Stakeholder Expectations & Competitive Advantage.
Official References:
Which activities are part of Step A: Understanding the Context in the double materiality assessment process? Select all options that apply.
Mapping the organization's value chain
Engaging with affected stakeholders to gather input
Analyzing the legal and regulatory landscape
Developing a list of material risks and opportunities
The Answer Is:
A, B, CExplanation:
Thedouble materiality assessment processconsists of multiple steps, withStep A: Understanding the Contextfocusing on setting the groundwork for identifying material impacts, risks, and opportunities (IROs).
Step A includes:
Mapping the organization's value chain (Option A)
This step involves identifying all elements of the organization's value chain, including suppliers, distributors, and business partners, to understand where sustainability impacts occur.
It helps in pinpointing potential sustainability matters, risks, and opportunities related to both impact and financial materiality.
Engaging with affected stakeholders to gather input (Option B)
Stakeholder engagement is a critical part of the materiality assessment as it informs the organization about direct and indirect sustainability impacts.
The ESRS guidance stresses that businesses must engage with affected stakeholders (e.g., employees, communities, consumers) and sustainability experts as part of the due diligence process.
Analyzing the legal and regulatory landscape (Option C)
Organizations must review applicable laws, regulatory frameworks, and international sustainability commitments that may affect their sustainability reporting obligations.
This ensures compliance withEU regulations (CSRD, ESRS, Taxonomy Regulation, SFDR)and other relevant legal requirements.
D. Developing a list of material risks and opportunities
This step belongs toStep B: Identifying Material Sustainability Matters, where the organization formally identifies and assesses material IROs. Step A is only about gathering contextual information to inform this process.
Commission Delegated Regulation (EU) 2023/2772, Section 3.3- Double materiality and materiality assessment process.
EFRAG IG 1: Materiality Assessment, Chapter 2.2- Understanding the context and engagement with affected stakeholders.
EFRAG Compilation of Explanations January–November 2024- Provides clarifications on stakeholder engagement and legal context review in Step A.
Incorrect Answer:Official References:
