ESRS Reporting: A Complete Guide for Sustainability Disclosure

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ESRS Reporting: A Complete Guide to Sustainability Disclosure

ESRS Reporting

Key Takeaways

  • ESRS is the reporting framework used under the CSRD.
  • Reporting is based on the principle of double materiality.
  • Companies disclose environmental, social and governance information where topics are material.
  • Many US suppliers will encounter ESRS indirectly through customer sustainability data requests.
  • ISCC certification can support parts of ESRS reporting but is not a substitute for ESRS compliance.

The ESRS framework was substantially revised by the European Commission in July 2026 to simplify reporting, reduce mandatory datapoints and streamline materiality assessments. Companies preparing for reporting should therefore use the latest adopted standards rather than relying solely on the original 2023 ESRS.

ESRS reporting is rapidly becoming one of the most important frameworks in global sustainability disclosure, and its impact is now reaching US-based organizations and international certification systems like ISCC. The European Sustainability Reporting Standards (ESRS), developed under the EU’s Corporate Sustainability Reporting Directive (CSRD), define how companies must disclose environmental, social, and governance (ESG) data. Even where a US supplier is not directly subject to the CSRD, large European customers may request sustainability information from parts of their value chain. The nature and extent of those requests will depend on the customer’s reporting obligations and the relevance of the supplier’s data. This guide breaks down what ESRS reporting is, how it works, what it covers, and what ISCC-certified organizations in the US need to know to stay ahead of evolving compliance expectations.

What Is ESRS Reporting?

ESRS reporting refers to the process of disclosing sustainability-related information using the European Sustainability Reporting Standards, a comprehensive set of standards published by the European Financial Reporting Advisory Group (EFRAG) and mandated under the CSRD.

Unlike voluntary sustainability reporting frameworks such as GRI or the ISSB Standards (which build on the recommendations of the former TCFD), ESRS reporting is legally binding for companies within the EU’s scope. The standards are organized into cross-cutting standards (ESRS 1 and ESRS 2) and topic-specific standards that span environmental, social, and governance areas. Organizations must disclose material information across these domains in their annual management reports.

For ISCC-certified organizations, particularly those exporting biomass, biofuels, or other sustainable products to European buyers, ESRS reporting can increase sustainability reporting expectations for organizations supplying European customers. European counterparties are increasingly required to demonstrate the sustainability performance of their supply chains, meaning US suppliers could face indirect pressure to align their own disclosures with ESRS expectations.

The Structure of ESRS: What the Standards Actually Cover

ESRS 1 and ESRS 2 — The Foundation of All Reporting

ESRS 1 sets out the general principles and architecture of ESRS reporting. It defines concepts like double materiality,  the requirement to assess both how sustainability issues affect the company (financial materiality) and how the company affects people and the planet (impact materiality). This is a defining feature that separates ESRS from many other frameworks.

ESRS 2 covers general disclosures applicable to all companies within the scope of ESRS reporting. It requires companies to report on their governance structures, strategy, business model, materiality assessment process, and performance metrics. ESRS 2 contains the general disclosures that reporting companies must provide. Topic-specific disclosures under the environmental, social and governance standards are generally determined through the company’s double materiality assessment, subject to specific mandatory requirements and the latest ESRS provisions. Together, these two standards form the foundation of ESRS reporting.

Environmental Standards — E1 to E5

The environmental pillar of ESRS reporting is often the largest reporting area for many organizations. It covers five distinct topic standards:

ESRS E1 — Where climate change is assessed as material, ESRS E1 requires disclosures covering greenhouse gas emissions, transition planning, climate-related risks, targets, and other climate-related information. Where applicable under ESRS E1, companies disclose Scope 1, Scope 2, and relevant Scope 3 greenhouse gas emissions, together with climate-related risks, transition plans, and targets. For ISCC-certified organizations dealing in biogenic carbon and land-use emissions, this standard is particularly relevant and technically demanding.

ESRS E2 — Where pollution is assessed as material, ESRS E2 requires disclosures relating to pollution impacts, risks, policies, actions, and metrics across operations and the value chain. Where pollution is material, companies disclose pollution-related risks, impacts, policies, actions, metrics, and mitigation measures.

ESRS E3 —Where water and marine resources are assessed as material, ESRS E3 requires disclosures on water consumption, withdrawals, discharges, impacts, and related management practices.

ESRS E4 — Where biodiversity and ecosystems are assessed as material, ESRS E4 requires disclosures on dependencies, impacts, risks, opportunities, policies, actions, and targets relating to biodiversity. This standard has meaningful overlap with ISCC sustainability criteria relating to land use and deforestation risk.

ESRS E5 — Where resource use and circular economy are assessed as material, ESRS E5 requires disclosures on resource inflows, resource outflows, waste, and circularity strategies. Organizations involved in bio-based product supply chains will often find this standard relevant, depending on the outcome of their double materiality assessment.

Social Standards — S1 to S4

The social pillar spans four standards covering the full stakeholder spectrum:

ESRS S1 — Own Workforce requires detailed disclosures on working conditions, pay equity, health and safety, and employee development. This is one of the most data-intensive standards due to the granularity of workforce metrics required.

ESRS S2 — Workers in the Value Chain extends labor-related disclosures beyond direct employees to contract workers and suppliers. For ISCC-certified companies with global agricultural supply chains, this standard can require extensive disclosures about value chain workers, related impacts, policies, actions, and risks.

ESRS S3 — Affected Communities addresses how company operations impact local and indigenous communities, a particularly sensitive area for land-use-intensive sectors.

ESRS S4 — Consumers and End-Users focuses on product-related social impacts, data privacy, and responsible marketing practices.

Governance Standard — G1

ESRS G1 — Business Conduct addresses anti-corruption, anti-bribery, lobbying activities, supplier relationship management, and payment practices. It complements the EU’s other regulatory frameworks and reinforces the ethical accountability dimension of ESRS reporting.

What About Sector-Specific ESRS?

In addition to the cross-cutting and topic-specific standards, the original ESRS framework envisioned sector-specific standards tailored to individual industries. However, following the 2026 revisions to the ESRS, the European Commission prioritized simplifying the reporting framework, and sector-specific standards are still under development. For now, most organizations preparing ESRS reports should focus on the cross-cutting standards (ESRS 1 and ESRS 2) and the applicable topic-specific standards identified through their double materiality assessment.

Double Materiality: The Core Concept That Defines ESRS Reporting

One of the most distinctive, and often misunderstood aspects of ESRS reporting is the concept of double materiality. Traditional financial reporting asks: “What matters to investors?” ESRS asks two questions simultaneously:

Impact materiality: How does the company impact the environment and society? Financial materiality: How do sustainability issues create financial risks or opportunities for the company?

A topic is material under ESRS if it qualifies under either dimension. This dual lens means companies cannot limit their disclosures to what affects their bottom line, they must also account for what their operations do to the world.

For ISCC-certified organizations in the US, this has practical implications. If a company’s biomass sourcing affects local water systems or smallholder farmers, those impacts become material under ESRS E3 and S2, even if they don’t directly affect company financials in the short term. Building a robust double materiality assessment is therefore the critical first step in any ESRS reporting process.

Who Does ESRS Reporting Apply To?

Following amendments adopted in 2026, mandatory CSRD reporting generally applies to EU companies exceeding both 1,000 employees and €450 million in annual net turnover. Separate rules apply to certain non-EU groups with substantial operations in the EU. Because the scope and implementation rules have changed significantly, US companies should assess their position based on their EU turnover, subsidiaries and branches rather than relying on the original CSRD thresholds.

What this means for US companies and ISCC members: Even if your headquarters are in the United States, your reporting obligations will depend on whether you meet the applicable non-EU scope criteria under the CSRD. Many US suppliers will instead experience ESRS indirectly through sustainability information requests from European customers. More immediately, your European customers and partners who are in scope will need to collect supply chain sustainability data from you. ISCC certification provides a credible foundation for some of these disclosures, but it does not replace the full scope of ESRS requirements.

How ESRS Reporting Connects to ISCC Certification

ISCC (International Sustainability and Carbon Certification) is a globally recognized certification system for sustainable biomass, bioenergy, and bio-based products. There are meaningful overlaps between what ISCC certifies and what ESRS standards require — particularly in the environmental and social pillars.

Key areas of alignment include:

  • GHG emissions and lifecycle assessment (ESRS E1 ↔ ISCC GHG methodology): ISCC requires GHG calculations for certified supply chains. This information can support certain ESRS E1 disclosures, particularly for companies reporting emissions associated with certified biomass and bio-based inputs. However, organizations must still ensure the data aligns with ESRS reporting boundaries, methodologies, and assurance requirements. 
  • Land use and biodiversity (ESRS E4 ↔ ISCC land criteria):ISCC’s land-use and sustainability criteria can support parts of the evidence needed for ESRS E4 disclosures, but they do not cover the full biodiversity and ecosystem reporting requirements.
  • Social standards and labor rights (ESRS S2 ↔ ISCC social criteria): ISCC’s social criteria for workers in the value chain share substantive overlap with ESRS S2 on value chain workers.

However, ISCC certification alone is not sufficient for full ESRS compliance. ESRS reporting requires narrative disclosures, forward-looking targets, transition plans, and governance accountability that go well beyond what a certification audit covers. Organizations should treat ISCC as a valuable building block, not a substitute, for ESRS reporting.

Practical Steps to Prepare for ESRS Reporting

Organizations that want to build ESRS reporting readiness should approach it systematically:

1. Conduct a Double Materiality Assessment: Map your business model, value chain, and stakeholder impacts. Identify which ESRS topics are material under both the impact and financial materiality lenses. This assessment forms the foundation of the ESRS reporting process.

2. Conduct a Data Gap Analysis: Compare what data you currently collect (through ISCC audits, internal EHS systems, or voluntary ESG reports) against the specific data points required by each relevant ESRS standard. Most organizations find significant gaps in Scope 3 data, workforce diversity metrics, and biodiversity impact data.

3. Build Cross-Functional Reporting Teams: ESRS reporting is not a sustainability team task alone. It requires input from finance, legal, procurement, HR, and operations. Establishing clear ownership early prevents bottlenecks during reporting cycles.

4. Invest in Technology for Data Collection and Management: Manual data collection using spreadsheets creates audit risk and reporting errors. Purpose-built platforms such as Carboledger help organizations collect, manage, and validate supplier sustainability data, product carbon information, and traceability records across complex supply chains. This information can support selected ESRS disclosures, particularly those involving value-chain emissions and sustainability data collection.

5. Align With Assurance Requirements: Sustainability reports prepared under the CSRD are generally subject to limited assurance. Companies should monitor future EU assurance standards and national implementation requirements.

Tips: Common ESRS Reporting Mistakes to Avoid

Treating materiality as a formality: A box-checking materiality assessment undermines the entire report’s credibility and creates legal risk.

Underestimating Scope 3 complexity: For most organizations, Scope 3 emissions, particularly from purchased goods and upstream agriculture, are the largest and hardest to measure. ISCC-certified supply chains help but don’t fully solve this.

Siloing the process: ESRS reporting fails when sustainability teams work in isolation. The CFO, legal counsel, and procurement teams must be actively involved.

Ignoring the forward-looking requirements. ESRS is not just about historical performance. Transition plans, targets, and scenario analysis are core requirements, not optional add-ons.

Conclusion

ESRS reporting represents a fundamental shift in how companies are expected to account for their environmental and social impact, not just for European businesses, but for any organization embedded in global supply chains, including ISCC-certified operators in the US. Understanding the structure of ESRS, the principle of double materiality, and the specific requirements across environmental, social, and governance standards is the first step toward credible compliance.

The organizations that will navigate ESRS reporting most effectively are those that start early, invest in quality data infrastructure, and treat sustainability disclosure as a strategic asset rather than a compliance burden. Tools like Carboledger help supply chain organizations manage supplier sustainability data, carbon information, and traceability records that support selected ESRS disclosures. Broader ESRS reporting also requires governance, workforce, financial, and narrative information from other business systems.

ESRS reporting is complex, but with the right preparation and the right partners, it is entirely manageable.

Frequently Asked Questions

What does ESRS stand for in sustainability reporting?

ESRS stands for European Sustainability Reporting Standards. These are a set of mandatory disclosure standards developed by EFRAG under the EU’s Corporate Sustainability Reporting Directive (CSRD). They cover environmental, social, and governance topics and are designed to standardize ESG reporting across European companies and global supply chains.

Is ESRS reporting mandatory for US companies?

ESRS reporting may apply to certain non-EU companies that meet the applicable CSRD scope criteria. Following amendments adopted in 2026, companies should assess their obligations based on the latest EU thresholds and implementation rules. Many US companies will instead experience ESRS indirectly through sustainability information requests from European customers.

How is ESRS different from GRI or TCFD?

Unlike voluntary sustainability reporting frameworks such as GRI or the ISSB Standards (which build on the recommendations of the former TCFD), ESRS reporting is legally mandated for companies within the scope of the CSRD. ESRS also introduces the concept of double materiality, requiring companies to assess both their impact on the environment and society and sustainability-related risks to the business, a dual lens not required by most other frameworks.

What is double materiality in ESRS reporting?

Double materiality means companies must assess sustainability topics from two angles: impact materiality (how the company affects the environment and people) and financial materiality (how sustainability issues affect the company’s financial position). A topic is material under ESRS if it qualifies under either dimension, making the assessment broader than traditional financial risk reporting.

How does ISCC certification help with ESRS reporting?

ISCC certification supports ESRS reporting in areas like GHG emissions calculation (relevant to ESRS E1), land use and biodiversity criteria (relevant to ESRS E4), and labor standards in the supply chain (relevant to ESRS S2). However, ISCC certification does not replace the full narrative, governance, and forward-looking disclosures required under ESRS. It serves as a credible data foundation, not a complete substitute.