ESRS E1 Climate Change: What Auditors and Preparers Need to Get Right

Why ESRS E1 is different from every other topical standard

EFRAG’s 2025 State of Play report found that 98% of 646 analysed companies mapped ESRS E1 as material. That makes it the one standard you can’t skip and the one most likely to generate an assurance finding if the file is thin. Unlike every other topical ESRS, omitting E1 from your sustainability statement requires a detailed written justification plus a forward-looking analysis of what could make climate material in the future. If your client can’t produce that justification, E1 applies.

Every other topical ESRS follows the same materiality gatekeeping rule: if the double materiality assessment concludes that the topic isn’t material, you don’t report on it. ESRS E1 adds a second requirement. Even if a company concludes that climate change is not material, ESRS 1 paragraph 30 and E1 paragraph 1 together require a detailed explanation of why that conclusion was reached, plus a forward-looking analysis describing the conditions under which climate could become material.

In practice, this creates an asymmetric burden. Reporting on E1 when climate is material requires disclosures across all 11 requirements (subject to sub-topic materiality). Concluding that E1 is not material still requires documented evidence strong enough to satisfy an assurance provider. Given that EFRAG’s own analysis shows 98% materiality rates, the second path is harder to defend than the first.

ESRS E1 covers three sub-topics: climate change mitigation, climate change adaptation, and energy. The July 2025 Amended Exposure Draft made this split explicit, allowing companies to assess materiality at the sub-topic level. A company could report on mitigation and energy without reporting on adaptation if the assessment supports that conclusion. But the reverse is unusual. Any company that identifies climate adaptation as material will almost always have material mitigation exposures too.

E1 also carries the heaviest regulatory cross-referencing of any topical standard. Its disclosure requirements interact with the EU Climate Law (Regulation (EU) 2021/1119), the Climate Benchmark Standards Regulation (EU 2020/1818), the SFDR, and the EU Taxonomy. For assurance providers, this means testing whether the client’s E1 disclosures are consistent with what they’ve reported (or plan to report) under these adjacent regimes. An inconsistency between a Taxonomy-aligned CapEx figure and the E1 transition plan is the kind of finding that leads to an emphasis of matter paragraph.

ESMA’s review of the first cycle of ESRS reports (covering the 2024 financial year for Wave 1 companies) identified materiality assessment disclosure as a recurring weakness. Two companies received qualified opinions. Four others got emphasis of matter paragraphs flagging scope limitations in materiality assessments, Tier 1-only supply chain coverage, reliance on estimates in quantitative metrics, and incomplete basis of preparation disclosures. Climate sat at the centre of several of these findings.

The 11 disclosure requirements explained

ESRS E1 contains 11 numbered disclosure requirements, organised in four blocks: strategy, IRO management, metrics, and financial effects. The July 2025 draft expanded the standard from 64 to 81 datapoints while restructuring some requirements and moving voluntary items to the Non-Mandatory Implementation Guidance (NMIG).

E1-1: Transition plan for climate change mitigation (paragraphs 10–13)

This disclosure asks whether the company has a plan to align its strategy and business model with the 1.5°C target under the Paris Agreement and EU Climate Law. If no plan exists, the company must state this and indicate whether and when it expects to adopt one. Paragraph 11 specifies the content: the plan must describe how the company will decarbonise, including locked-in GHG emissions from existing assets, and must connect to the CapEx and OpEx figures that fund the transition.

For assurance purposes, the risk sits in the gap between a stated plan and evidence of execution. A transition plan that describes 2030 targets without showing how current capital allocation supports those targets is the disclosure equivalent of a going concern assessment that ignores the cash flow forecast. You need both the plan and the numbers behind it.

July 2025 additions require the disclosure to include CapEx amounts related to coal, oil, and gas activities (defined by specific NACE codes: B.05, B.06, B.09.1, C.19, D.35.1, D.35.3, D.46.81). This provides a quantitative anchor that limits the scope for vague narrative.

E1-2: Climate-related risks and scenario analysis (paragraphs 14–16)

This requirement covers how the company identifies and assesses material climate-related risks and opportunities. Companies must describe their processes for identifying these exposures and distinguish between physical risk categories (in own operations and the value chain) and transition risk categories.

Scenario analysis is not always mandatory here. The standard requires companies to describe whether they use it, and if so, what scope and methodology they applied. Language in the July 2025 draft aligns more closely with IFRS S2 paragraph 22, relevant for companies reporting under both frameworks.

E1-3: Resilience analysis (paragraphs 17–19)

Separate from E1-2, the resilience analysis asks the company to assess its ability to adapt to climate-related uncertainties. Paragraph 19 requires disclosure of what was covered (which parts of own operations and value chain), the methodology used, and the results. For many mid-market companies, this will be the most conceptually unfamiliar requirement. It asks for forward-looking assessment capability rather than historical data reporting. Most mid-market clients won’t have done this before, so expect to spend time explaining the concept and helping management distinguish between a resilience analysis (what E1-3 requires) and a risk assessment (which they’ve likely already done for E1-2 purposes).

The scope of the resilience analysis should align with the material risks identified in E1-2. If the client identified physical risks at a specific production site, the resilience analysis should cover that site.

E1-4: IRO management processes (paragraph 20)

A cross-cutting requirement. The company must describe how it identifies and assesses climate-related impacts, risks, and opportunities. Application requirements AR 9 through AR 12 break this into separate processes: one for identifying climate impacts (AR 9), one for physical risks (AR 11), and one for transition risks and opportunities (AR 12). Expect documented process descriptions rather than just output data.

E1-5: Policies related to climate change

Moved to ESRS 2 General Disclosures in the July 2025 draft as part of the broader structural simplification. Climate policies are now disclosed under the general framework (ESRS 2 GDR-P) rather than as a standalone E1 requirement. Substance is unchanged, but the location shifts. Check that your client hasn’t duplicated the disclosure in both E1 and ESRS 2. Duplication is a structural finding, and the restructuring means some clients’ first-draft sustainability statements will put climate policies in the wrong section if they’re working from the 2023 template.

E1-6: Targets related to climate change (paragraphs 21–26)

GHG emission reduction targets must be gross targets. ESRS E1 is explicit: the company cannot include GHG removals, carbon credits, or avoided emissions as a means of meeting reduction targets. If a client’s target narrative describes a 40% reduction by 2030 but the underlying calculation nets carbon credits against Scope 1, the disclosure fails E1-6 on its own terms.

Targets must include whether they are science-based (and if validated by an external body), the base year, the target year, interim milestones, and the link to the transition plan in E1-1. Missing any of these elements is a disclosure gap that an assurance provider will flag.

E1-7: Energy consumption and mix (paragraphs 27–31)

Total energy consumption in MWh, split by source. The July 2025 draft retained the fossil/nuclear/renewable breakdown while clarifying the reporting boundary for high climate impact sectors (NACE Sections A through H and Section L, per Commission Delegated Regulation (EU) 2022/1288). Energy intensity metrics from the 2023 version are under review for potential deletion pending consultation feedback.

E1-8: Gross Scope 1, 2, and 3 emissions (paragraphs 32–36)

The core emissions disclosure. July 2025 amendments aligned the GHG emissions reporting boundary more closely with the GHG Protocol, allowing only the financial consolidation approach. Where financial consolidation doesn’t fully capture emissions from operated assets outside the reporting entity’s scope, a separate operational control disclosure is required.

Scope 3 remains the pain point. EFRAG rejected the ISSB’s relief that would have permitted omission of Scope 3 where impracticable. Companies must report Scope 3 even where data quality is limited, though the July 2025 draft introduces a relief allowing companies to report metrics based on partial scope when reliable data are unavailable. For assurance purposes, the documentation of Scope 3 estimation methodology and data sources is where the testing work concentrates.

A notable editorial correction was published on 10 July 2025: Application Requirement AR 22(e), which originally referenced only Scope 1, was amended to apply to all emission scopes.

E1-9: GHG removals and carbon credits (paragraphs 37–38)

New in the amended structure as a standalone disclosure requirement (previously embedded within E1-6 and E1-8). Companies must disclose GHG removals separately from gross emissions and describe any carbon credits purchased or retired. Credits cannot be netted against gross emissions. This creates a clear paper trail: the gross emissions figure in E1-8 must not reflect any offset, and credits must appear here with documentation of quality, additionality, and permanence.

E1-10: Internal carbon pricing (paragraph 39)

If the company uses an internal carbon price (for investment decisions, risk assessments, or strategic planning), it must disclose the price per tonne of CO2e and describe how it’s applied. Voluntary in practice for many companies, but testing-relevant when the client’s transition plan in E1-1 references carbon pricing as part of its decarbonisation economics.

E1-11: Anticipated financial effects (paragraphs 39–42)

The final disclosure requirement asks the company to quantify the expected financial impact of material physical and transition risks on its financial position and future performance. July 2025 additions include a requirement to disclose the carrying value of real estate assets used as loan collateral (paragraph 41(c)), reflecting the intersection of climate risk and financial asset valuation. Companies must also disclose the percentage of assets or revenue derived from business activities aligned with climate-related opportunities.

For auditors performing the financial statement audit in parallel with the sustainability assurance engagement, the consistency between E1-11 and the financial statements’ impairment and provision disclosures is a cross-referencing priority.

What the July 2025 amendments actually changed

The July 2025 Amended Exposure Drafts represent the most significant recalibration of the ESRS since the 2023 Delegated Act. EFRAG reported a 57% reduction in mandatory datapoints across the full set, though the actual reduction in disclosure substance is less dramatic. Much of the simplification is textual and structural rather than substantive.

For E1 specifically, EFRAG expanded the datapoint count from 64 to 81 while restructuring how they’re organised. Voluntary datapoints moved from the main text to the NMIG, leaving the standard focused on mandatory requirements.

Four changes matter most for practitioners.

First, the GHG emissions reporting boundary now requires the financial consolidation approach exclusively, with a supplementary operational control disclosure where needed. This is closer to the GHG Protocol’s methodology and resolves an ambiguity in the 2023 version. For companies already reporting under CDP or GHG Protocol frameworks, this alignment reduces the reconciliation burden.

Second, several provisions were aligned with IFRS S2 language, including those on transition plans, scenario analysis, resilience, and internal carbon pricing. But this alignment is not full convergence. EFRAG rejected incorporating the ISSB’s relief for Scope 3 omission and diverged on the scope of the “undue costs and efforts” relief (which EFRAG expanded beyond the ISSB’s formulation).

Third, a new partial-scope reporting relief for metrics was introduced. Where reliable data isn’t available, companies can report on a partial calculation scope, provided they disclose the limitation. This is a pragmatic concession to data availability challenges, particularly for Scope 3, but it creates assurance complexity: the practitioner must assess whether the claimed limitation is genuine or a convenient exclusion.

Fourth, the broader Omnibus package reshaped the CSRD itself. The stop-the-clock directive (Directive (EU) 2025/794), published in April 2025, postponed Wave 2 and Wave 3 reporting by two years. Wave 1 companies continue under the current ESRS for 2025, with a quick-fix delegated act (effective November 2025) extending certain first-year transitional provisions. The Omnibus I provisional agreement reached in December 2025 further narrows the CSRD scope to companies with at least 1,000 employees and €450M net turnover, eliminates the future move to reasonable assurance permanently, and removes the requirement for sector-specific standards.

For mid-market assurance practices, this means the population of companies requiring E1 disclosures will be smaller but better-resourced than originally anticipated.

One further point on timing. The July 2025 Exposure Drafts were published for a 60-day public consultation closing 29 September 2025. EFRAG submitted its final technical advice to the European Commission in November 2025. The Commission will adopt the revised standards via delegated act, expected at some point in 2026, though no official date has been set. Until adoption, Wave 1 companies continue reporting under the 2023 Delegated Act ESRS with the quick-fix extensions. Wave 2 companies preparing for their first reporting year should build their E1 working papers against the amended text, since the 2023 version is the one being superseded.

If your client falls into the gap between Wave 1 (currently reporting) and Wave 2 (delayed by the stop-the-clock directive), the practical advice is to prepare against the amended ESRS text while monitoring the delegated act timeline. Building the file to the 2023 version and then retrofitting to the 2025 amendments wastes time. The substantive disclosure requirements in E1 haven’t been reduced. They’ve been reorganised.

Worked example: documenting E1 for a mid-market Dutch manufacturer

Dijkstra Coatings B.V., a Rotterdam-based industrial coatings manufacturer with €67M revenue and 280 employees. Two production facilities in the Netherlands. Wave 2, now expecting to report under the Amended ESRS from FY 2028 following the Omnibus stop-the-clock delay.

Step 1. Confirm E1 materiality at sub-topic level

Dijkstra’s double materiality assessment identifies climate change mitigation and energy as material. The two production facilities have combined Scope 1 emissions of approximately 4,200 tCO2e from natural gas-fired curing ovens, plus Scope 2 of 1,800 tCO2e from purchased electricity. Climate adaptation is assessed as not material based on a physical risk screening showing low exposure to flooding, heat stress, and water scarcity at both sites.

Step 2. Assess transition plan status (E1-1)

Dijkstra does not have a formal 1.5°C-aligned transition plan. The working paper records this fact and notes that management expects to develop one before the first reporting year (FY 2028). No further disclosure is required under E1-1 beyond stating that no plan exists and when one is expected.

Step 3. Calculate and disclose GHG emissions (E1-8)

Scope 1: 4,200 tCO2e (natural gas combustion at two facilities, emission factors from the Dutch NIL/RVO database, financial consolidation boundary).

Scope 2: 1,800 tCO2e (location-based, Dutch grid average emission factor of 0.328 kg CO2e/kWh for 5,488 MWh consumed).

Scope 3: preliminary screening identifies Category 1 (purchased goods, primarily petrochemical raw materials) and Category 9 (downstream transport) as the two material categories. Dijkstra estimates Category 1 at approximately 12,400 tCO2e using spend-based emission factors. Category 9 comes to 1,100 tCO2e using distance-based factors from its primary logistics provider.

Step 4. Prepare energy consumption disclosure (E1-7)

Total energy consumption: 23,400 MWh. Fossil sources: 17,900 MWh (natural gas). Grid electricity: 5,488 MWh (Dutch grid mix, approximately 62% renewable in 2027 per CBS data). On-site renewable: 12 MWh (rooftop solar, installed Q3 2027). NACE classification confirmed as C.20 (high climate impact sector).

Step 5. Document anticipated financial effects (E1-11)

Dijkstra identifies one material transition risk: tightening VOC emission limits under the amended Industrial Emissions Directive (IED 2.0) could require a €2.1M capex investment in abatement technology at the Europoort facility within five years. No material physical risks were identified at step 1. The disclosure quantifies the anticipated capex, the time horizon (medium-term, 2029–2033), and links back to E1-2.

This file gives a reviewer a complete E1 trail for a mid-market manufacturer. Dijkstra’s disclosures cover the material sub-topics, state where plans or data are incomplete, and connect every figure to a documented source. An assurance provider performing limited assurance under the CEAOB guidelines would find a traceable data chain from source documents to each E1 datapoint.

Practical checklist for your current engagement

1. Confirm E1 materiality at sub-topic level (mitigation, adaptation, energy) and document the conclusion for each. If any sub-topic is excluded, the ESRS 1 paragraph 30 justification must stand on its own.
2. Check whether the client has a formal transition plan. If not, record the E1-1 paragraph 13 disclosure and move on. Do not confuse a general sustainability strategy with a 1.5°C-aligned transition plan; they are not the same disclosure.
3. Verify that GHG emissions across all scopes are disclosed gross, with no carbon credits netted against any figure. Carbon credits belong in E1-9 only.
4. Trace every emission factor to a named, dated source (RVO, DEFRA, ecoinvent, GHG Protocol database). An emission factor without a traceable source is an assurance finding. Most Scope 3 documentation falls apart at exactly this point: the total looks reasonable, but the underlying factors can’t be traced to a published database with a known vintage year.
5. Cross-check E1-11 anticipated financial effects against the financial statement provisions and contingent liability disclosures. Inconsistencies between the sustainability statement and the financial statements are exactly what ESMA flagged in its 2025 enforcement priorities.

Common mistakes from the first reporting cycle

• Generic materiality assessments: ESMA’s 2025 enforcement review found that several Wave 1 companies disclosed materiality assessments too generic to support their E1 disclosures. Stating “climate is material” without documenting which sub-topics are material and which are not creates a gap between the DMA and the standard’s requirements. ESRS E1 requires sub-topic-level granularity; a single-sentence materiality conclusion fails that standard.
• Undocumented Scope 3 methodology: The CEAOB’s September 2024 guidelines on limited assurance highlighted that practitioners should test whether Scope 3 methodology and estimation approaches are documented with enough specificity for the assurance conclusion to hold. First-cycle reports frequently presented Scope 3 totals without disclosing which categories were included, which estimation methods were used, or what percentage of the total relied on spend-based proxies versus activity data.

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Further reading and source references

• ESRS E1, Climate Change: the topical standard governing climate-related disclosures under the CSRD.
• ESRS 1, General Requirements: governs materiality assessment, including paragraph 30 on justifying exclusion of a topical standard.
• CEAOB Guidelines, Limited Assurance Engagements on Sustainability Reporting (September 2024): covers assurance procedures for ESRS disclosures.
• GHG Protocol, Corporate Standard: the methodology framework underlying ESRS E1-8 emissions calculations.