The European Commission finally adopted on 31 July 2023 (one month later than originally planned) the first set of European Sustainability Reporting Standards (ESRS) that will be used by all companies subject to the Sustainability Reporting Directive (CSRD). This is another important step towards the transition to a sustainable European economy.
As a reminder, the Corporate Sustainability Reporting Directive (Directive (EU) 2022/2464 – CSRD) was published in the Official Journal of the European Union on 16 December 2022. The directive specifies how sustainability information is to be reported using common, mandatory European principles. In order to develop the European sustainability reporting standards, the European Commission requested the support of the European Financial Reporting Advisory Group (EFRAG). In the process of formalising the principles, called European Sustainability Reporting Standards (ESRS), EFRAG was inspired by the GRI principles already in place.
Already at the end of November 2022, EFRAG had submitted the first set of European Sustainability Standards to the European Commission, which was then finally approved eight months later.
The first companies that will have to apply the new standards, are the large public interest companies already subject to the Non Financial Reporting Directive (NFRD) 2014/95/EU, starting on 1 January 2024, with data publication in 2025. After that, starting on 1 January 2025, with data publication from 2026, it will be the turn of large companies not yet subject to the non-financial reporting requirements (with more than 250 employees and/or EUR 40 million in turnover and/or EUR 20 million in assets). Finally, from 1 January 2026, with data publication in 2027, it will be the turn of SMEs and other listed companies, with the possibility of a derogation to 2028.
The first set of the twelve approved standards covers environmental, social and governance aspects, including climate change, biodiversity and human rights. These principles aim to help stakeholders understand the sustainability impact of the companies they invest in.
In particular, there are two general principles, five principles dedicated to environmental issues, four principles referring to social issues and finally one principle dedicated to governance:
– ESRS 1 General Requirements,
– ESRS 2 General Disclosures,
– ESRS E1 Climate Change,
– ESRS E2 Pollution,
– ESRS E3 Water and marine resources,
– ESRS E4 Biodiversity and ecosystems
– ESRS E5 Resource use and circular economy,
– ESRS S1 Own workforce
– ESRS S2 Workers in the value chain
– ESRS S3 Affected communities
– ESRS S4 Consumers and end-users
– ESRS G1 Business conduct.
In the coming months, EFRAG’s work will be dedicated to consolidating this first set of standards, e.g. by introducing special sections on its website for requesting information on the application of the principles, but also and above all to the development of the second set of sustainability standards comprising both sectoral and SME principles, to be issued by 30 June 2024.