CCP ESG Frameworks & CSRD 2 — Questions and Answers
Question 1: Under the CSRD, which companies are required to report starting with fiscal year 2025?
- All EU-listed SMEs
- Large EU public-interest entities already under NFRD (Correct answer)
- Non-EU companies with EU-listed securities only
- Companies with fewer than 500 employees voluntarily
Correct answer: Large EU public-interest entities already under NFRD
Large public-interest entities already subject to the Non-Financial Reporting Directive (NFRD) must comply with CSRD starting FY2025.
Question 2: What does the concept of 'double materiality' require companies to assess under CSRD?
- Both quantitative and qualitative sustainability impacts
- Financial materiality from the outside-in AND impact materiality from the inside-out (Correct answer)
- Materiality for equity holders and debt holders separately
- Materiality under both IFRS and GAAP simultaneously
Correct answer: Financial materiality from the outside-in AND impact materiality from the inside-out
Double materiality requires companies to assess how sustainability issues affect the business (financial materiality) and how the business affects society and environment (impact materiality).
Question 3: Which standard-setting body develops the European Sustainability Reporting Standards (ESRS) that underpin CSRD?
- International Sustainability Standards Board (ISSB)
- European Financial Reporting Advisory Group (EFRAG) (Correct answer)
- Global Reporting Initiative (GRI)
- Task Force on Climate-related Financial Disclosures (TCFD)
Correct answer: European Financial Reporting Advisory Group (EFRAG)
EFRAG was mandated by the European Commission to develop ESRS, the technical standards companies use to comply with CSRD.
Question 4: How does the GRI Standards approach materiality differently from ISSB's IFRS S1/S2?
- GRI focuses on investor-only financial risks; ISSB focuses on broader stakeholder impacts
- GRI focuses on impact materiality for all stakeholders; ISSB focuses on enterprise value for investors (Correct answer)
- GRI requires quantitative data only; ISSB requires qualitative narratives only
- GRI is voluntary globally; ISSB is legally mandatory in all G20 countries
Correct answer: GRI focuses on impact materiality for all stakeholders; ISSB focuses on enterprise value for investors
GRI uses impact materiality centered on effects on people and planet, while ISSB's standards focus on sustainability risks and opportunities that affect enterprise value for investors.
Question 5: Which ESRS cross-cutting standard establishes general requirements including the materiality assessment process?
- ESRS E1
- ESRS S1
- ESRS 1 (Correct answer)
- ESRS G1
Correct answer: ESRS 1
ESRS 1 sets the general requirements applicable to all sustainability disclosures, including how to conduct the materiality assessment.
Question 6: A US-headquartered company with €150M net turnover in the EU and an EU branch must comply with CSRD under which provision?
- It is fully exempt as a non-EU parent
- Third-country company rules triggering consolidated reporting obligations (Correct answer)
- NFRD carve-out for foreign private issuers
- SEC equivalency exemption
Correct answer: Third-country company rules triggering consolidated reporting obligations
CSRD extends to non-EU parent companies generating over €150M in EU net turnover, requiring them to publish group-level sustainability reports.
Question 7: In the SASB framework, industry-specific standards are organized by sector classifications defined in which system?
- Global Industry Classification Standard (GICS)
- Sustainable Industry Classification System (SICS) (Correct answer)
- North American Industry Classification System (NAICS)
- International Standard Industrial Classification (ISIC)
Correct answer: Sustainable Industry Classification System (SICS)
SASB uses its own Sustainable Industry Classification System (SICS) to group 77 industries into 11 sectors, reflecting sustainability-relevant business model similarities.
CCP ESG Frameworks & CSRD 2
Under the CSRD, which companies are required to report starting with fiscal year 2025?