Question 1

Which of the following are key characteristics of an internal control for assurance purposes? Select all that apply.

Accepted Answer

A, C

Explanation: 2023/2772, various EFRAG guidance documents, and reports related to CSRD, ESRS, stakeholder engagement, double materiality, external assurance, and digital reporting Study guide Reference at the end of each question Under the ESRS framework, effective internal controls for assurance purposes must meet key characteristics to ensure reliability, traceability, and auditability. Correct Options Explained: (A) Documentation & Implementation: Internal controls must be formally documented, implemented as per the designated schedule, and consistently applied​. (C) Testability by External Assurance Providers: Assurance providers must be able to verify the controls, test their effectiveness, and ensure compliance with CSRD assurance requirements​. Incorrect Options Explained: (B) Same Staff Performing & Assuring the Control: A fundamental principle of internal control is the separation of duties to avoid conflicts of interest. The control must be performed by one team and assured independently​. (D) No Need for Documentation: Proper documentation is mandatory for internal controls to enable traceability, testing, and regulatory compliance​. ESRS Reference: Commission Delegated Regulation (EU) 2023/2772, GOV-5: Risk management and internal controls over sustainability reporting, highlighting the necessity of internal control mechanisms​. EFRAG Assurance Guidelines: Stipulating that documented controls must be verifiable and tested for external assurance​.

Question 2

What are the two categories of stakeholders identified in the ESRS?

Accepted Answer

A

Explanation: The European Sustainability Reporting Standards (ESRS) categorize stakeholders into two 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 of engagement with affected stakeholders as part of an undertaking’s due diligence and materiality assessment process, ensuring that material impacts, risks, and opportunities are adequately identified and reported​. Official Reference: 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​.

Question 3

What disclosures must be included in the sustainability statement? Select all that apply.

Accepted Answer

Explanation: The sustainability statement under ESRS is structured according to ESRS 1 and ESRS 2, outlining specific disclosure requirements. The required disclosures include: General Disclosure Requirements from ESRS 2 ESRS 2 outlines general disclosure requirements, including governance, strategy, and impact, risk, and opportunity management (IROs). These disclosures are mandatory for all undertakings, providing the foundation of the sustainability statement​. ✅ (A) is correct Environmental Objectives under the EU Taxonomy Regulation Companies must disclose their alignment with the EU Taxonomy Regulation, particularly under Article 8 of Regulation (EU) 2020/852, which includes financial and non-financial companies' obligations regarding taxonomy-aligned activities​. ✅ (B) is correct Financial Performance Metrics from IFRS Reports Financial metrics from IFRS are NOT a required disclosure under ESRS. The sustainability statement focuses on non-financial reporting, while financial performance remains under IFRS standards in financial statements. ❌ (C) is incorrect Governance-Related Information Determined by the Materiality Assessment Governance disclosures (ESRS G1 Business Conduct) include transparency about policies, risk management, and ethical business practices. The materiality assessment determines the necessary governance disclosures based on entity-specific risks and opportunities​. ✅ (D) is correct Conclusion: The sustainability statement must include general disclosure requirements (A), environmental objectives under the EU Taxonomy (B), and governance-related information based on materiality (D). Financial performance metrics from IFRS reports (C) are not required. Official Reference: Commission Delegated Regulation (EU) 2023/2772​ Compilation Explanations January - July 2024​

Question 4

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.

Accepted Answer

A, C, D

Explanation: During Step B of the double materiality assessment process, organizations must identify 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) 16 provides a comprehensive reference list of sustainability matters to consider when identifying IROs. This list includes environmental, social, and governance topics aligned with EU sustainability objectives​. C . Due diligence processes ✅ ESRS requires organizations to use due diligence processes to identify negative sustainability impacts. Due diligence aligns with frameworks such as the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights​. This ensures that potential risks and opportunities are assessed based on international sustainability standards. D . Feedback from stakeholders ✅ Stakeholders, including employees, suppliers, customers, and affected communities, provide crucial insights into sustainability impacts. ESRS mandates engagement with affected stakeholders as part of the IRO identification process​. Why is B. Financial materiality thresholds ❌ incorrect? Financial materiality thresholds apply later in the process (Step C) when evaluating the financial impact of sustainability matters. Step B focuses only on identifying IROs, making financial thresholds irrelevant at this stage​. Conclusion: Organizations should use the ESRS 1 AR 16 sustainability matters list, due diligence processes, and stakeholder feedback to identify IROs in 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

Question 5

Which statements about Inline XBRL are TRUE? Select all that apply.

Accepted Answer

A, C, D

Explanation: Inline XBRL (iXBRL) is the digital reporting format required under the Corporate Sustainability Reporting Directive (CSRD) to ensure standardized and machine-readable sustainability reporting. It is required under CSRD for sustainability reporting The CSRD mandates the use of Inline XBRL for sustainability reports, ensuring digital tagging for structured data submission, making information easier 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, allowing structured 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, ensuring both usability and compliance with digital reporting requirements​. ✅ (C) is correct It ensures that tags are embedded within a visually clear format Correct. The Inline 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 XBRL is 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. Official Reference: Commission Delegated Regulation (EU) 2023/2772​ Compilation Explanations January - July 2024​

Question 6

What is the PRIMARY purpose of creating a cross-departmental taskforce for CSRD compliance?

Accepted Answer

B

Explanation: A cross-departmental taskforce is crucial for Corporate Sustainability Reporting Directive (CSRD) compliance as it enables an organization to coordinate sustainability reporting efforts effectively. Key responsibilities of the taskforce include: Ensuring alignment across departments (e.g., Finance, Compliance, Legal, ESG, and Operations) to gather accurate sustainability data. Meeting reporting timelines required under ESRS and CSRD regulations. Managing responsibilities across teams to ensure sustainability disclosures are consistent with financial reporting controls. Enhancing cross-functional collaboration for double materiality assessment and ensuring compliance with assurance and audit requirements​. Incorrect Answers: A . Creating a hierarchical structure that limits communication between departments → Incorrect because the goal is to enhance, not restrict, collaboration. C . Reducing the workload by assigning all tasks to a single department → Incorrect because sustainability reporting requires input from multiple business areas. D . Minimizing interaction between different departments → Incorrect because effective ESRS reporting requires broad stakeholder engagement. Official Reference: Commission Delegated Regulation (EU) 2023/2772, ESRS 2 GOV-1 - Defines governance structures for sustainability reporting​. EFRAG Compilation of Explanations (January–July 2024) - Explains the need for cross-functional coordination in CSRD compliance​.

Question 7

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
__________.

Accepted Answer

C

Explanation: 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 a starting 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. Reference: 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​​ ====

Question 8

What features define a digital reporting platform? Select all that apply.

Accepted Answer

A, C, D

Explanation: A digital reporting platform under 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 like XBRL (eXtensible Business Reporting Language), ensuring machine-readability and interoperability with financial reporting standards​. (C) Interactive dashboards Platforms often provide visualization tools and dashboards to facilitate analysis and comparison of sustainability data across different periods and entities​. (D) Real-time updates and compliance tools Digital reporting solutions should offer real-time data integration to enable ongoing compliance tracking and alignment with evolving regulatory requirements​. Incorrect Option: (B) Manual data entry processes Manual entry is not a characteristic of a digital reporting platform. Instead, digital platforms prioritize automation, integration, and structured data processing to improve efficiency and reduce errors​. Official Reference: 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​.

Question 9

Which of the following is included in the environmental section of the topical ESRS?

Accepted Answer

C

Explanation: The Environmental Section of the topical ESRS includes disclosure requirements covering environmental sustainability matters. This section specifically relates to environmental objectives as defined in the EU Taxonomy, ensuring alignment with broader European sustainability goals. The topical ESRS environmental standards (ESRS E1 - E5) cover: ESRS E1 – Climate Change (Mitigation & Adaptation) ESRS E2 – Pollution ESRS E3 – Water and Marine Resources ESRS E4 – Biodiversity and Ecosystems ESRS E5 – Resource Use and Circular Economy These standards align with the environmental objectives of the EU Taxonomy Regulation (Regulation (EU) 2020/852) and require organizations to report on their material environmental impacts, risks, and opportunities (IROs)​. Why Other Options Are Incorrect: A . Social impact and labor rights: → Incorrect, as this belongs to the Social (S) section (ESRS S1 - S4). B . Financial performance information: → Incorrect, as this is part of financial reporting, not ESRS environmental disclosures. D . Corporate governance and board diversity: → Incorrect, as governance matters are covered under ESRS G1 Business Conduct​. Official Reference: Commission Delegated Regulation (EU) 2023/2772​ Compilation Explanations January - November 2024​

Question 10

Which of the following correctly fills the gaps in the paragraph below?
The first set of the ESRS consist of several standards: The first group includes __________ General
requirements and __________ General disclosures. These standards apply regardless of the specific
sustainability topic being reported.
The next group includes ten __________ that cover various topics across the three dimensions of
sustainable development. For example, ESRS E1 focuses on the environmental dimension,
particularly climate change.
Finally, the last group includes the __________ which are currently under development.

Accepted Answer

C

Explanation: The ESRS (European Sustainability Reporting Standards) framework consists of three primary categories of standards: ESRS 1 (General Requirements): ESRS 1 sets out the fundamental principles and requirements for sustainability reporting. It provides an overview of the structure and drafting conventions of the ESRS framework, defining the categories of ESRS standards: cross-cutting, topical, and sector-specific. It also establishes the double materiality principle as the basis for sustainability disclosures. ESRS 2 (General Disclosures): ESRS 2 outlines the core disclosure requirements applicable to all sustainability topics, ensuring comparability and completeness. It includes general governance, strategy, impact, risk, and opportunity management disclosures applicable to all sustainability topics. These disclosure requirements apply to all undertakings regardless of the specific sustainability topics being reported. Topical Standards: The ESRS framework includes ten topical standards covering the three key dimensions of sustainability: Environmental (E): ESRS E1 (Climate Change), ESRS E2 (Pollution), ESRS E3 (Water & Marine Resources), ESRS E4 (Biodiversity & Ecosystems), and ESRS E5 (Resource Use & Circular Economy). Social (S): ESRS S1 (Own Workforce), ESRS S2 (Workers in the Value Chain), ESRS S3 (Affected Communities), and ESRS S4 (Consumers & End-users). Governance (G): ESRS G1 (Business Conduct). These standards provide specific requirements on sustainability matters, complementing the general disclosure requirements in ESRS 2. Sector-Specific Standards: Sector-specific ESRS are currently under development. These will address sustainability matters specific to different industries, ensuring that sectoral nuances are properly considered. They aim to fill gaps not sufficiently covered by the topical standards by defining industry-specific impacts, risks, and opportunities. Why is C. ESRS 1; ESRS 2; topical standards; sector-specific standards the correct answer? ESRS 1 (General Requirements) comes first, setting the foundation. ESRS 2 (General Disclosures) follows, providing cross-cutting disclosure requirements. Topical standards are next, covering specific sustainability topics. Sector-specific standards are the final category, though they are still in development. Thus, the correct order aligns with the official structure of the ESRS framework as mandated in Commission Delegated Regulation (EU) 2023/2772​. Official Commission Delegated Regulation (EU) 2023/2772, various EFRAG guidance documents, and CSRD-related

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