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EFRAG Finalizes First Three ESRS Implementation Guidance Documents

EFRAG Finalizes First Three ESRS Implementation Guidance Documents

On May 31, 2024, the European Financial Reporting Advisory Group (EFRAG) announced the finalization of its first three ESRS (European Sustainability Reporting Standards) Implementation Guidance (IG) documents.

These documents reflect the outcome of extensive public feedback and address the key challenges of implementing ESRS standards, providing invaluable support for stakeholders and undertakings.

Overview of the Implementation Guidance Documents

This document offers an illustrative process for materiality assessment, expanding on the concepts of impact and financial materiality. It includes practical examples and FAQs to help organizations disclose material impacts, risks, and opportunities effectively.

EFRAG IG 2: Value Chain

The Value Chain Implementation Guidance outlines the requirements for reporting on the value chain, from materiality assessment to policies, actions, metrics, and targets. It includes a detailed value chain map summarizing disclosure requirements and frequently asked questions.

EFRAG IG 3: ESRS Datapoints

This document translates the complete ESRS Set 1 list of detailed requirements into an Excel format. It includes information such as the type of requirement (quantitative or qualitative) and whether they are subject to transitional provisions. This guidance is a basis for data gap analysis or data collection exercises.

Detailed Analysis of the Guidance Documents

EFRAG IG 1: Materiality Assessment

The Materiality Assessment Implementation Guidance (MAIG) provides a comprehensive framework for organizations to assess materiality in the context of sustainability reporting. It ensures that organizations can systematically identify and disclose their most significant sustainability impacts, risks, and opportunities.

Key Components:

  • Illustrative Materiality Assessment Process:

  • Step-by-Step Guidance: The MAIG outlines a detailed process for conducting materiality assessments, beginning with understanding the context of the organization’s operations and extending to identifying and evaluating impacts, risks, and opportunities.

  • Impact and Financial Materiality:

  • Concept Interplay: Detailed explanations and real-world examples illustrate how impact materiality (effects on the environment and society) and financial materiality (effects on the financial performance of the company) intersect and influence each other.

  • FAQs:

  • Practical Guidance: The document includes a comprehensive FAQ section addressing common questions and challenges organizations might face during the materiality assessment process.

EFRAG IG 2: Value Chain

The Value Chain Implementation Guidance (VCIG) is designed to help organizations navigate the complexities of reporting on their entire value chain, from upstream suppliers to downstream consumers.

Key Features:

  • Reporting Requirements:

  • Detailed Guidance: Provides thorough instructions on determining the reporting boundaries, particularly concerning operational control in environmental standards.

  • Value Chain Map:

  • Comprehensive Overview: Summarizes the implications of value chain disclosures across all ESRS requirements, helping organizations understand where and how to report value chain-related data.

  • FAQs:

  • Common Questions: Addresses frequently asked questions to provide further clarification and practical insights into value chain reporting.

EFRAG IG 3: ESRS Datapoints

The List of ESRS Datapoints document is an essential tool for organizations to manage and analyze their sustainability data effectively. It helps in organizing and understanding the detailed requirements for ESRS reporting.

Key Components:

  • Detailed Requirements List:

  • Comprehensive Excel File: An Excel file containing all the detailed requirements from ESRS Set 1, organized by disclosure requirements and application requirements.

  • Additional Information:

  • Data Collection Aid: Provides guidance on how to use the Excel file for data gap analysis or data collection exercises, ensuring that organizations can systematically identify and address data gaps.

Significant Milestones and Future Directions in ESRS Implementation

The finalization of these three ESRS Implementation Guidance documents represents a significant achievement in the standardization of sustainability reporting. By addressing critical areas such as materiality assessment, value chain reporting, and detailed datapoints, EFRAG has laid a solid foundation for organizations to build their sustainability reports with clarity and precision.

Milestones Achieved

  • Completion of Public Feedback Integration: EFRAG's process of integrating public feedback from December 2023 to February 2024 ensures the guidance is comprehensive and responsive to stakeholder needs.

  • Clarification of Reporting Boundaries: The Value Chain Implementation Guidance clarifies the reporting boundaries, including the concept of operational control, which is vital for accurate environmental reporting.

  • Detailed Data Requirements: The ESRS Datapoints document provides a granular breakdown of reporting requirements, facilitating more precise data collection and gap analysis.

Future Directions

  • Continuous Improvement: As organizations begin to implement these standards, ongoing feedback, and practical application will inform further refinements and updates to the guidance.

  • Sector-Specific Standards: Future development of sector-specific ESRS will provide more tailored guidance, addressing the unique sustainability challenges and reporting needs of different industries.

  • Enhanced Data Accuracy: The emphasis on detailed data collection and the use of proxies and estimates where direct data is unavailable will drive improvements in the accuracy and reliability of sustainability reporting.

The release of these implementation guidance documents marks a pivotal step towards enhancing the quality and consistency of sustainability reporting in Europe. By providing clear and practical guidance, EFRAG supports organizations in their journey toward greater transparency and accountability in their sustainability practices.

As the implementation of these standards evolves, continuous engagement with stakeholders and ongoing refinement of the guidance will be crucial to achieving the goals of the European Sustainability Reporting Standards.


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