The “Summer of CSRD” series – disaggregated reporting

The EU’s Corporate Sustainability Reporting Directive will have broad impact. Approximately 50,000 undertakings are expected to have a reporting obligation. The recently finalized European Sustainability Reporting Standards specify the information required to be reported under CSRD.

As we recently posted, this summer’s ESG must-read is ESRS 1, which contains the general requirements applicable to CSRD reporting. The objective of ESRS 1 is to provide an understanding of the architecture of the ESRS, the drafting conventions and fundamental concepts used and the general requirements for preparing and presenting sustainability information in accordance with CSRD.

Understanding ESRS 1 is therefore critical to preparing for CSRD reporting. It will drive not only disclosure, but also the underlying processes and controls. As a threshold matter, understanding ESRS 1 also is important for developing the project plan for CSRD readiness.

Posts in this “Summer of CSRD” series discuss selected aspects of ESRS 1, in a bite-sized read, in more or less the order presented in ESRS 1.

In the last post, we discussed EFRAG’s draft materiality assessment implementation guidance.

In this post, we discuss disaggregated reporting. This is our last in a series of posts on ESRS 1 chapter 3 (“double materiality as the basis for sustainability disclosures”).

When is disaggregated reporting required?

ESRS 1 provides that, when needed for a proper understanding of an undertaking’s material impacts, risks and opportunities (IROs), the undertaking must disaggregate the reported information as follows:

• By country, when there are significant variations of material IROs across countries and when presenting the information at a higher level of aggregation would obscure material information about IROs; or
• By significant site or significant asset, when material IROs are highly dependent on a specific location or asset.

When defining the appropriate level of disaggregation for reporting, the undertaking must consider the disaggregation adopted in its materiality assessment. Depending on the undertaking’s specific facts and circumstances, a disaggregation by subsidiary may be necessary.

If data from different levels, or multiple locations within a level, is aggregated, the undertaking must ensure that the aggregation does not obscure the specificity and context necessary to interpret the information. The undertaking may not aggregate material items that differ in nature.

If an undertaking presents information disaggregated by sectors, it will be required to adopt the applicable ESRS sector classification (if any) specified in a delegated act adopted by the European Commission. However, when a topical or sector-specific ESRS requires that a specific level of disaggregation be adopted in preparing a specific item of information, the requirement in that ESRS controls.

Next up: Due diligence.

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