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GRI ESRS Professional Certification Exam Sample Questions (Q18-Q23):

NEW QUESTION # 18
Which of the following is true about setting thresholds for financial materiality under the ESRS?

A. Thresholds should focus exclusively on the short-term time horizon.
B. Financial materiality thresholds are based on the likelihood of occurrence and the potential magnitude of financial effects.
C. Reputational risks cannot be considered financially material.
D. Organizations should only use monetary thresholds, such as revenue or costs.

Answer: B

Explanation:
Under the ESRS framework, financial materiality is assessed based on a combination of:
* Likelihood of occurrence- The probability that a sustainability matter will have a financial impact.
* Potential magnitude of financial effects- The scale of the impact on financial position, performance, cash flows, access to finance, or cost of capital over short-, medium-, or long-term periods.
This is outlined in ESRS 1, which states that a sustainability matter isfinancially materialif it could reasonably be expected totrigger material financial effectson an undertaking. Financial materiality is not limited to issues under the direct control of the company; it includesdependencies on natural, human, and social resourcesthat could create risks or opportunities.
* Option A:The ESRS framework allows for bothqualitative and quantitative thresholds, not just monetary ones (e.g., revenue or costs).
* Option C:Reputational risks can be financially material, as they may affect access to finance, cost of capital, or customer trust, ultimately influencing the company's financial performance.
* Option D:Thefinancial materiality assessmentis conducted for theshort-, medium-, and long-term, not just the short term.
Why the other options are incorrect:References:
* Commission Delegated Regulation (EU) 2023/2772
* Compilation Explanations January - July 2024, ESRS 1 on Financial Materiality
* EFRAG Guidance on Double Materiality and Risk Assessments

NEW QUESTION # 19
Which of the following is included in the environmental section of the topical ESRS?

A. Information about the organization's financial performance
B. Disclosures relating to social impact and labor rights
C. Disclosures relating to environmental objectives defined in the EU Taxonomy
D. Data about corporate governance and board diversity

Answer: C

Explanation:
TheEnvironmental Sectionof the topical ESRS includes disclosure requirements covering environmental sustainability matters. This section specifically relates toenvironmental objectives as defined in the EU Taxonomy, ensuring alignment with broader European sustainability goals.
Thetopical ESRS environmental standards (ESRS E1 - E5)cover:
* ESRS E1- Climate Change (Mitigation & Adaptation)
* ESRS E2- Pollution
* ESRS E3- Water and Marine Resources
* ESRS E4- Biodiversity and Ecosystems
* ESRS E5- Resource Use and Circular Economy
These standardsalign with the environmental objectives of the EU Taxonomy Regulation(Regulation (EU)
2020/852) andrequire organizations to report on their material environmental impacts, risks, and opportunities (IROs).
* A. Social impact and labor rights:#Incorrect, as this belongs to theSocial (S) section(ESRS S1 - S4).
* B. Financial performance information:#Incorrect, as this is part offinancial reporting, not ESRS environmental disclosures.
* D. Corporate governance and board diversity:#Incorrect, as governance matters are covered under ESRS G1 Business Conduct.
* Commission Delegated Regulation (EU) 2023/2772
* Compilation Explanations January - November 2024
Why Other Options Are Incorrect:Official References:

NEW QUESTION # 20
Which statements about Inline XBRL are TRUE?
Select all that apply.

A. It is required under the CSRD for sustainability reporting
B. It ensures that tags are embedded within a visually clear format
C. It makes reports both human-readable and machine-readable
D. It only applies to narrative disclosures, not numerical data

Answer: A,B,C

Explanation:
Inline XBRL (iXBRL)is the digital reporting format required under theCorporate Sustainability Reporting Directive (CSRD)to ensure standardized and machine-readable sustainability reporting.
* It is required under CSRD for sustainability reporting
* TheCSRD mandates the use of Inline XBRLfor sustainability reports, ensuring digital tagging for structured data submission, making informationeasier to analyze by regulators and investors.
* #(A) is correct
* It only applies to narrative disclosures, not numerical data
* Incorrect.Inline XBRL applies to both numerical data (KPIs, metrics) and narrative disclosures, allowingstructured reporting across qualitative and quantitative sustainability information.
* #(B) is incorrect
* It makes reports both human-readable and machine-readable
* True. Inline XBRL embeds machine-readable tags into a human-readable document, ensuring both usability and compliance with digital reporting requirements.
* #(C) is correct
* It ensures that tags are embedded within a visually clear format
* Correct. TheInline XBRL standard ensures that the digital tags do not alter the visual presentation of the report, maintaining clarity for human readers while allowing structured data extraction.
* #(D) is correct
Conclusion:Inline XBRLis required under CSRD (A), makes reports both human-readable and machine- readable (C), and ensures a visually clear format (D). However, it applies to both narrative and numerical data, making (B) incorrect.
* Commission Delegated Regulation (EU) 2023/2772
* Compilation Explanations January - July 2024
Official References:

NEW QUESTION # 21
Why should organizations consider reporting on sustainability? Select all options that apply.

A. Reporting demonstrates transparency and accountability by disclosing environmental, social, and economic impacts.
B. Stakeholders increasingly expect organizations to report on their sustainability performance.
C. Demonstrating sustainability performance can enhance brand value and provide a competitive advantage.
D. Reporting guarantees immediate financial gains for the organization.

Answer: A,B,C

Explanation:
Organizations should report on sustainability for several reasons, includingtransparency, stakeholder expectations, and competitive advantage. Below is the evaluation of each option:
* A. True- Reporting on sustainabilitydemonstrates transparency and accountability, allowing companies to disclose theirenvironmental, social, and governance (ESG) impacts.
* B. True-Stakeholders, including investors, customers, and regulators,increasingly demand sustainability reportingto assess the long-term viability of a company.
* C. False- While sustainability reporting may contribute tolong-term financial gains, it doesnot guarantee immediate financial benefits.
* D. True- Companies withstrong sustainability performanceoften enjoyenhanced brand value and competitive advantage, attracting investors and customers who prefer sustainable businesses.
Why Sustainability Reporting MattersBenefit
Impact on Organization
Transparency & Accountability
Builds trust with investors, regulators, and the public
Stakeholder Expectations
Meets regulatory and customer expectations for ESG disclosures
Brand & Competitive Advantage
Companies with strong ESG performance are more attractive to investors
Regulatory Compliance
Helps meet CSRD and ESRS disclosure obligations
* CSRD & ESRS Guidance (2024)- Key Sustainability Reporting Benefits.
* EU Platform on Sustainable Finance Report (2025)- Stakeholder Expectations & Competitive Advantage.
Official References:

NEW QUESTION # 22
How do the ESRS define stakeholders?

A. Those who can influence or contribute to the undertaking.
B. Those who can affect or be affected by the undertaking.
C. Those who can support or benefit from the undertaking.

Answer: B

Explanation:
According to the European Sustainability Reporting Standards (ESRS) under the Commission Delegated Regulation (EU) 2023/2772, stakeholders are defined as individuals or groups who can affect or be affected by the undertaking. The ESRS distinguishes between two main groups of stakeholders:
* Affected stakeholders: These are individuals or groups whose interests are affected or could be affected - positively or negatively - by the undertaking's activities and its direct and indirect business relationships across its value chain.
* Users of sustainability statements: These include primary users of general-purpose financial reporting (e.g., existing and potential investors, lenders, and other creditors such as asset managers, credit institutions, and insurance undertakings) and other users, including the undertaking's business partners, trade unions, social partners, civil society and non-governmental organizations, governments, analysts, and academics.
Furthermore, engagement with affected stakeholders is a crucial aspect of the undertaking's ongoing due diligence process and sustainability materiality assessment. This involves identifying and assessing actual and potential negative impacts to inform the materiality assessment process for sustainability reporting.
Official References:
* Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 supplementing Directive 2013/34
/EU on sustainability reporting standards.
* ESRS 1: General Requirements, Section 3.1 (Stakeholders and their relevance to the materiality assessment process).

NEW QUESTION # 23
......

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