The “Summer of CSRD” series – qualitative characteristics of reported information

August 25, 2023
7 minutes

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.

Each post in this “Summer of CSRD” series will 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 the categories of ESRS standards, reporting areas and drafting conventions, which are addressed in chapter 1 of ESRS 1.

In this post, we move on to chapter 2 of ESRS 1, which discusses the qualitative characteristics of reported information.

ESRS 1 indicates that, when preparing its sustainability statement, an undertaking must apply (1) the fundamental qualitative characteristics of information, i.e., relevance and faithful representation; and (2) the enhancing qualitative characteristics of information, i.e., comparability, verifiability and understandability. Each of these characteristics is discussed below.


  • Sustainability information is relevant when it may make a difference in the decisions of users. ESRS 1 notes that information may make a difference in a decision even if some users choose not to take advantage of it or are already aware of it from other sources. Sustainability information may impact decisions of users if it has predictive value, confirmatory value, or both.
    • Information has predictive value if it can be used as an input to processes employed by users to predict future outcomes. Sustainability information does not need to be a prediction or forecast to have predictive value; it has predictive value if employed by users in making their own predictions.
    • Information has confirmatory value if it provides feedback about (confirms or changes) previous evaluations.
  • Materiality is an entity-specific aspect of relevance based on the nature or magnitude, or both, of the items to which the information relates.

Faithful representation

  • To be useful, information must faithfully represent the substance of what it purports to represent. Faithful representation requires information to be (1) complete, (2) neutral and (3) accurate.
    • A complete depiction of an impact, risk or opportunity (IRO) includes all material information necessary for users to understand the IRO. This includes how the undertaking has adapted its strategy, risk management and governance in response to the IRO and the metrics identified to set targets and measure performance.
    • A depiction is neutral if it is without bias in the selection or disclosure of information. Information is neutral if it is not slanted, weighted, emphasized, de-emphasized or otherwise manipulated to make it more likely that users will receive the information favorably or unfavorably. To be neutral, information must be balanced, covering both favorable/positive and unfavorable/negative aspects. Negative and positive material impacts from an impact materiality perspective as well as material risks and opportunities from a financial materiality perspective must receive equal attention. Aspirational sustainability information, such as targets or plans, must cover both aspirations and factors that could prevent the undertaking from achieving the aspirations.
      • Neutrality is supported by prudence, which is the exercise of caution when making judgments under conditions of uncertainty. Prudence means that opportunities and risks are not understated or overstated.
      • To be neutral, information may not be netted or compensated. However, an undertaking may present net information in addition to gross values, if that presentation does not obscure relevant information and includes a clear explanation about the effects of the netting and the reasons for doing so.
    • Accurate information implies that the undertaking has implemented adequate processes and internal controls to avoid material errors or material misstatements. Accordingly, information can be accurate without being perfectly precise in all respects. However, estimates must be presented with a clear emphasis on their possible limitations and associated uncertainty. The amount of precision needed and attainable, and the factors that make information accurate, depend on the nature of the information and the matters it addresses.


  • Sustainability information is comparable when it can be compared with information provided by (1) the undertaking in previous periods and (2) other undertakings, in particular those with similar activities or operating within the same industry.
  • The ESRS 1 Application Requirements indicate that undertakings must carefully consider comparability between undertakings. This includes considering whether available and relevant frameworks, initiatives, reporting standards and benchmarks (such as technical material issued by the International Sustainability Standards Board or the Global Reporting Initiative) provide elements that can support comparability.
  • ESRS 1 indicates that consistency is related to, but not the same as, comparability. Consistency refers to the use of the same approaches or methods for the same sustainability matter, from period to period, by the undertaking and other undertakings. Consistency helps to achieve the goal of comparability.
  • Comparability also is not the same as uniformity. For information to be comparable, like components must look alike and different components must look different.


  • Verifiability helps to give users confidence that information is complete, neutral and accurate (see faithful representation above). Sustainability information is verifiable if it is possible to corroborate the information or the inputs used to derive it. Verifiability means that various knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation.
  • Sustainability information must be provided in a way that enhances its verifiability, such as by (1) including information that can be corroborated by comparing it with other information available to users about the undertaking’s business, other businesses or the external environment, (2) providing information about inputs and methods of calculation used to produce estimates or approximations and (3) providing information reviewed and agreed by the undertaking’s administrative, management and supervisory bodies or their committees.
  • Sustainability information that takes the form of explanations or is forward-looking can be supportable by, for example, faithfully representing on a factual basis the strategies, plans and risk analyses of the undertaking. To help users decide whether to use the information, the undertaking is required to describe the underlying assumptions and methods of producing the information, as well as other factors that provide evidence that it reflects the actual plans or decisions made by the undertaking.


  • Sustainability information is understandable when it is clear and concise. Understandable information enables a reasonably knowledgeable user to readily comprehend the information being communicated.
    • For sustainability disclosures to be concise, they need to (1) avoid generic boilerplates that are not specific to the undertaking, (2) avoid unnecessary duplication of information, including information also provided in financial statements, and (3) use clear language and well-structured sentences and paragraphs.
    • Concise disclosures only include material information. If complementary information is presented, it must be provided in a way that avoids obscuring material information.
    • Clarity can be enhanced by distinguishing information about developments in the reporting period from information that remains relatively unchanged from period to period.
  • The completeness, clarity and comparability of sustainability disclosures rely on information being presented as a coherent whole. For sustainability disclosures to be coherent, they must explain the context and connections between related information.
    • Coherence also requires the undertaking to provide information in a way that allows users to relate information about sustainability-related IROs to information in the undertaking’s financial statements.
  • If sustainability-related risks and opportunities discussed in the financial statements have implications for sustainability reporting, the undertaking must include in the sustainability statement the information necessary for users to assess those implications. The undertaking also must present appropriate links to the financial statements.
  • The level of information, granularity and technicality of disclosures must be aligned with the needs and expectations of users. Abbreviations must be avoided and units of measure must be defined and disclosed.

Next up: understanding materiality.

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