ESRS-Professional Exam Dumps - ESRS Professional Certification Exam

According to the European Sustainability Reporting Standards (ESRS) under the Commission Delegated Regulation (EU) 2023/2772, stakeholders are defined as individuals or groups who can affect or be affected by the undertaking. The ESRS distinguishes between two main groups of stakeholders:

Affected stakeholders: These are individuals or groups whose interests are affected or could be affected – positively or negatively – by the undertaking’s activities and its direct and indirect business relationships across its value chain.

Users of sustainability statements: These include primary users of general-purpose financial reporting (e.g., existing and potential investors, lenders, and other creditors such as asset managers, credit institutions, and insurance undertakings) and other users, including the undertaking’s business partners, trade unions, social partners, civil society and non-governmental organizations, governments, analysts, and academics​.

Furthermore, engagement with affected stakeholders is a crucial aspect of the undertaking’s ongoing due diligence process and sustainability materiality assessment. This involves identifying and assessing actual and potential negative impacts to inform the materiality assessment process for sustainability reporting​.

Official References:

Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34/EU on sustainability reporting standards​.

ESRS 1: General Requirements, Section 3.1 (Stakeholders and their relevance to the materiality assessment process).

Thedouble materiality assessment processconsists of multiple steps, withStep A: Understanding the Contextfocusing on setting the groundwork for identifying material impacts, risks, and opportunities (IROs).

Step A includes:

Mapping the organization's value chain (Option A)

This step involves identifying all elements of the organization's value chain, including suppliers, distributors, and business partners, to understand where sustainability impacts occur.

It helps in pinpointing potential sustainability matters, risks, and opportunities related to both impact and financial materiality​.

Engaging with affected stakeholders to gather input (Option B)

Stakeholder engagement is a critical part of the materiality assessment as it informs the organization about direct and indirect sustainability impacts.

The ESRS guidance stresses that businesses must engage with affected stakeholders (e.g., employees, communities, consumers) and sustainability experts as part of the due diligence process​.

Analyzing the legal and regulatory landscape (Option C)

Organizations must review applicable laws, regulatory frameworks, and international sustainability commitments that may affect their sustainability reporting obligations.

This ensures compliance withEU regulations (CSRD, ESRS, Taxonomy Regulation, SFDR)and other relevant legal requirements​.

D. Developing a list of material risks and opportunities

This step belongs toStep B: Identifying Material Sustainability Matters, where the organization formally identifies and assesses material IROs. Step A is only about gathering contextual information to inform this process​.

Commission Delegated Regulation (EU) 2023/2772, Section 3.3- Double materiality and materiality assessment process​.

EFRAG IG 1: Materiality Assessment, Chapter 2.2- Understanding the context and engagement with affected stakeholders​.

EFRAG Compilation of Explanations January–November 2024- Provides clarifications on stakeholder engagement and legal context review in Step A​.

Incorrect Answer:Official References:

TheESRS Taxonomyacts as aframeworkfor tagging sustainability disclosures, ensuring data is structured, consistent, and comparable across organizations.

TheCSRD requires sustainability information to be reported in a digitally accessible format, making it available for both people and machines.

Under the CSRD, sustainability reports will eventually be uploaded to theEuropean Single Access Point (ESAP), centralizing public financial and non-financial information across the EU​.

ESRS as a "framework"– The ESRS taxonomy defines a structure that allows sustainability data to be categorized and tagged effectively​.

"Digitally accessible format"– The CSRD mandates reporting inmachine-readable formatssuch asXBRLto improve transparency and comparability​.

European Single Access Point (ESAP)– ESAP will serve as thecentralized EU platformfor sustainability and financial disclosures​.

Correct Sentence Completion:Explanation of the Selected Answer:References:

EU Taxonomy Regulation and CSRD Reporting Structure​

EFRAG Explanation on ESRS Digital Reporting​

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 astarting 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.

References:

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​​

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Under the ESRS framework, financial materiality is assessed based on a combination of:

Likelihood of occurrence– The probability that a sustainability matter will have a financial impact.

Potential magnitude of financial effects– The scale of the impact on financial position, performance, cash flows, access to finance, or cost of capital over short-, medium-, or long-term periods​.

This is outlined in ESRS 1, which states that a sustainability matter isfinancially materialif it could reasonably be expected totrigger material financial effectson an undertaking. Financial materiality is not limited to issues under the direct control of the company; it includesdependencies on natural, human, and social resourcesthat could create risks or opportunities​.

Option A:The ESRS framework allows for bothqualitative and quantitative thresholds, not just monetary ones (e.g., revenue or costs)​.

Option C:Reputational risks can be financially material, as they may affect access to finance, cost of capital, or customer trust, ultimately influencing the company’s financial performance​.

Option D:Thefinancial materiality assessmentis conducted for theshort-, medium-, and long-term, not just the short term​.

Why the other options are incorrect:References:

Commission Delegated Regulation (EU) 2023/2772​

Compilation Explanations January - July 2024, ESRS 1 on Financial Materiality​

EFRAG Guidance on Double Materiality and Risk Assessments​