What are the European Sustainability Reporting Standards and why do they matter?
If you are a company operating in the European Union, you may have heard of the new European Sustainability Reporting Standards (ESRS) that were adopted by the European Commission on July 31, 2023. These standards are part of the EU’s ambitious agenda to promote sustainable finance and corporate responsibility, and they will have a significant impact on how companies report on their environmental, social and governance (ESG) performance.
In this blog post, I will explain what the ESRS are, who they apply to, and what they mean for your business.
What are the ESRS?
The ESRS are a set of standards that specify the information that companies need to disclose on their ESG impacts, risks and opportunities. They are based on the Corporate Sustainability Reporting Directive (CSRD), which requires all large companies and listed SMEs in the EU to publish annual sustainability statements as part of their management reports.
The ESRS cover a wide range of ESG topics, such as climate change, biodiversity, human rights, diversity, anti-corruption, etc. They consist of two cross-cutting standards that provide general reporting principles and concepts, and ten topical standards that provide detailed disclosure requirements for each ESG topic. The ESRS aim to ensure that companies provide relevant, reliable, comparable and verifiable information that meets the needs of investors and other stakeholders.
Who do the ESRS apply to?
The ESRS apply to all companies that fall under the scope of the CSRD. This includes:
• All large companies that have more than 250 employees or meet certain financial criteria
• All listed SMEs that have securities admitted to trading on a regulated market in the EU
• All companies that are subject to public interest entity (PIE) status under national law, such as banks, insurance companies, pension funds, etc.
The ESRS will apply from January 1, 2024 for financial years starting on or after that date. This means that the first sustainability statements using the ESRS will be published in 2025.