Exploring the intersection: ESRS and GRI standards

On the 31st of July 2023, the European Financial Reporting Advisory Group (EFRAG) adopted the ESRS - European Sustainability Reporting Standards - to determine which sustainability-related information the organisations shall collect and disclose under the Corporate Sustainability Reporting Directive (CSRD). The new reporting requirements are interconnected with the GRI Standards, however some aspects like new contents and the principle of double materiality have been introduced. This article explains the main differences and similarities between the new ESRS and the most widely adopted GRI reporting standards.

The ESRS is a set of 12 standards desired by European Commission to improve the availability of credible and comparable ESG data, thus reducing the reporting burden for organisations.

CSRD understands and promotes the international relevance of the GRI standards that is why the EU has decided to develop the ESRS in alignment with them, meaning that organisations that already use those standards will be better prepared to comply with ESRS requirements. On top of that, ensuring alignment between the ESRS and GRI will help achieve global comparability - enhancing quality and usability - and limit duplicated reporting requirements.

Despite the similitudes, there will also be differences between GRI’s impact-focused global standards and the double-materiality-focused EU standards as prescribed by the CSRD.

The attached download includes a comprehensive table that provides in-depth information and highlights the key differences between ESRS and GRI.

The novelty of the ESRS:

• A more central role for the materiality assessment process: in addition to the “Inside-out perspective” in which organisations should report their impact on society and the environment, the “Outside-in perspective” has been introduced, considering how external impacts could affect the organisation – this refers to double-materiality principle.
• Alignment with authoritative intergovernmental instruments on topics like responsible business conduct, human rights, and due diligence.
• Higher level of detail and granularity compared to GRI which implies new challenges for reporters to comply with all the requirements stipulated by the ESRS.
• A new architecture brought by ESRS containing a large number of diverse topics into fewer number of standards, especially for the social and governance dimensions.

Overlapping areas between ESRS and GRI:

Besides those novelties brought by the new reporting standards, there are also some similarities, in fact, as explained by GRI, the ESRS Standards are, as much as possible, fully aligned with the GRI Standards. Essentially, they share the goal of creating a comprehensive reporting system which enhance the transparency and the dialogue between companies and their stakeholders.

Even if the topics and the requirements in the ESRS will be expanded over time, the two different standards overlap in content and strict reporting requirements. For instance, the ESRS structure closely resembles that of the GRI, consisting of four main areas:

1. Cross-cutting standards, which include ESRS 1 General principles and ESRS 2 General disclosure requirements.
2. Environmental standards, which is further divided into five criteria (ESRS E1-E5).
3. Social standards, which is split into four criteria (ESRS S1-S4).
4. Governance standards, which is divided into 2 criteria (ESRS G1-G2).

The cross-cutting standards create a basis for all content of the topic-specific standards, therefore defining the fundamental concepts of the disclosure requirements.

Within the 4 areas that are composed by the 12 standards in total, corresponding disclosure requirements are specified with similarities to the GRI, like for “ESRS E1-6” regarding the total and the different GHG emissions. On the contrary, for instance, the ESRS require Scope 3 disclosure regardless of materiality.

ESRS goes beyond reporting

Despite the similarities between GRI and ESRS, the latter provides disclosure novelties, for example, reducing flexibility in the way data should be presented, and in addition, a more comprehensive ESG data collection following the double materiality principle.

In addition, the ESRS will be legally binding for certain organisations - starting from 2024 - representing a decisive advantage for the availability and comparability of data compared to GRI.

Given their gradual introduction, it may be possible that in near future the ESRS will surpass the GRI in the EU in terms of application, becoming a fundamental part for the systematic reporting routine for all kind of companies.

Overall, the adoption of ESRS guidelines and therefore the double materiality framework has the potential to accelerate an organisation’s sustainability strategy through deep understanding of outside-in and inside-out ESG impacts. The results of the process unveil both ESG risks and opportunities for the company, and those results must be signed off by the board. This is not only a game-changer but also and more importantly a chance to onboard the leadership and position ESG at the heart of the company’s strategy.

Eager to unlock the potential of double materiality?

If you are looking for personal guidance in the assessment process, please contact Johana Schlotter at Johana@finchandbeak.com or call +31 6 28 02 18 80 to discuss how Finch & Beak can help you improve your ESG performance.