Why Companies Should Start ESRS Reporting Now

Come 1 January 2026, large companies covered by the Corporate Sustainability Reporting Directive (CSRD) are expected to publish disclosures aligned with the European Sustainability Reporting Standards (ESRS) for the financial year 2025. The ESRS will take effect for in-scope companies operating in the EU, following the first implementation phase of the standards across the largest companies.

While their larger counterparts are already in the midst of preparing reports for the 2024 financial year to be released in 2025, companies covered in the second phase-in (1 January 2026) still have some time to prepare. These companies are those with an average of 250 employees during the financial year and a net turnover of €50 million or more.

In this article, we look at three reasons why such companies should start preparing for ESRS reporting now if they haven’t already.

Double materiality assessment

The most foundational part of ESRS reporting is the double materiality assessment. This assessment is an involved process that requires collaboration across multiple stakeholder groups. Traditionally, companies only needed to determine inward impacts. A sustainability matter is deemed material under the CSRD if it is recognized as significant from either the impact or financial perspective or if it meets both criteria simultaneously, reflecting the concept of double materiality. The double materiality assessment usually takes at least two months, and its duration is heavily linked to how many and how often stakeholders are engaged.

This will inevitably change the existing materiality assessment process. As the double materiality assessment is heavy on stakeholder consultation, it is recommended to familiarise stakeholders or communicate new or changed processes. This familiarisation exercise will take time, not to mention internal training needs to understand double materiality and to design processes in support of it. From determining thresholds for double materiality to stakeholder engagement and the identification of impact materiality and financial materiality, the entire double materiality assessment could take months, with stakeholder engagement ongoing throughout the year.

Gap analysis

The ESRS cover a range of general cross-cutting topics and topical ones that specify the reporting requirements across a range of environmental, social, and governance (ESG) topics. Although compatible with many other internationally recognised reporting benchmarks and sharing many similarities, the ESRS sets out its own reporting parameters which may differ from others. For example, a distinction is made between IROs (another key concept in the ESRS’ approach to materiality) where it may not be so clearly defined in other reporting standards. These differences require adjustments to the data collection process, and companies must ensure sufficient understanding within their own operations and through the supply chain to collect the right data.

The primary purpose of a gap analysis in the context of ESRS reporting is to:

• Identify Data Gaps: Determine where the company lacks the necessary data to report on material sustainability issues.

• Assess Reporting Capabilities: Evaluate the current reporting processes and systems against the ESRS requirements.
• Highlight Operational Shortcomings: Uncover areas where the company's sustainability practices are not aligned with best practices or regulatory expectations.

If internal knowledge or capacity is lacking, companies can consult externally with reporting advisors or use reporting software such as Daato, which can tell you if disclosure requirements are being met.

Data collection

A thorough comparison of the data against the required disclosures takes time, more so the data collection process to fill those gaps. Conducting an early gap analysis now gives companies a lead time of a few months to be fully prepared for data collection starting in 2025.

The gap analysis informs the approach to data collection. Some data collection methods may have to be adapted to satisfy ESRS criteria, which could prolong the data collection process. Companies should leave enough time for new information to be collected, bearing in mind the lengthy process of stakeholder engagement for information gathering.

No matter the effective date that applies to a particular company, a sooner start paves the way for better-prepared reporting.

How Daato helps

• The entire workflow, from the double materiality assessment to the final disclosure writing, is covered on Daato.
• Always know your next steps and make sure all the stakeholders engaged in your reporting are working with sufficient material and common definitions.
• Automate the aggregation and consolidation of all the ESRS quantitative data, and draw custom analytics of your ESG performance

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