Risk assessment is the process of identifying and evaluating potential threats to a company's operations, sustainability goals, or regulatory compliance. Under CSRD and ESRS, companies must assess risks related to climate, governance, and social issues, considering both short-term exposures and long-term vulnerabilities.
ESRS requires companies to evaluate sustainability-related risks across multiple time horizons: short-term (up to one year), medium-term (one to five years), and long-term (beyond five years). Risks must be assessed for both their likelihood and potential financial impact. This includes transition risks from regulatory changes, physical risks from climate change, and reputational risks from social or environmental controversies. The risk assessment directly feeds into the double materiality analysis and determines which ESRS topical standards apply.
Explore how to structure your CSRD risk assessment and read our comprehensive guide on ESRS reporting requirements for a detailed breakdown of what to include.
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