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CLIMATE // 05.03.2024
An overview of the most important facts
The European Sustainability Reporting Standards (ESRS) are a set of frameworks and guidelines developed by the European Union to standardise and improve corporate sustainability reporting. The first set of ESRS was adopted by the European Commission on 31 July 2023 and approved by the Council and Parliament on 31 October 2023. This means that companies reporting in accordance with CSRD from 2024 onwards must take ESRS requirements into account.
With the ESRS, the EU aims to create a standardised and transparent framework for corporate sustainability reporting. The objective of this is to ensure that companies disclose relevant information about their environmental, social and governance (ESG) practices. This serves to provide stakeholders such as investors, customers and the public with clear and comparable information so they can make informed decisions and promote sustainability in the business sector.
The ESRS guidelines are of great importance for companies as they require standardised and detailed reporting on various aspects of sustainability. The ESRS also promotes the integration of sustainability into corporate strategy and risk management by encouraging companies to review their impact on the environment and society and adjust their actions accordingly.
The ESRS standards are closely linked to the CSRD (Corporate Sustainability Reporting Directive).The CSRD expands reporting requirements for companies in the EU with regard to sustainability issues, and the ESRS standards provide the framework and specific guidelines, according to which companies must prepare their sustainability reports. The ESRS are therefore essential to the implementation of the CSRD as they ensure that reports are standardised, comprehensive and comparable.
Currently, the first set of ESRS comprises twelve reporting standards. These are divided into two cross-cutting standards, ESRS 1 and 2, and ten topical standards that address environmental, social and governance (ESG) issues.
Cross-Cutting Standards | Topical Standards | ||
---|---|---|---|
Environmental | Social | Governance | |
ESRS 1 General Requirements |
ESRS E1 Climate Change |
ESRS S1 Own Workforce |
ESRS G1 Business Conduct |
ESRS 2 General Disclosures |
ESRS E2 Pollution |
ESRS S2 Workers in the Value Chain |
|
ESRS E3 Water & Marine Resources |
ESRS S3 Affected Communities |
||
ESRS E4 Biodiversity & Ecosystems |
ESRS S4 Customers and Users |
||
ESRS E5 Resource Use & Circular Economy |
The draft originally prepared by the EFRAG (European Financial Reporting Advisory Group) was adopted by the European Commission with some important amendments. These changes aim to simplify reporting for companies and keep reporting proportionate. Additional adjustments have also been made for the first years of reporting.
The only ESRS set 1 standard that is mandatory for all companies is ESRS 2. A materiality assessment must be carried out for all other standards in the ESRS. The materiality assessment determines whether your company is required to report on a topic or not. With the amendments made to the ESRS, it is no longer mandatory to include an explanation of why a topic has been categorised as not material. This means that, with the exception of ESRS E1, explanations can be provided on a voluntary basis.
In addition, new transitional provisions make it easier for companies to prepare their first sustainability reports in accordance with ESRS standards. With these provisions, it’s not necessary for companies to disclose certain information in the first year of reporting.
Over the next few years, further standards will be added. These are currently being developed by EFRAG. Further standards will be created specifically for SMEs as well as for individual sectors.
Beginning in the financial year 2026, capital market-oriented SMEs must also report under the CSRD. An adapted standard for SMEs is being developed to ensure proportionality in reporting. The first drafts were published by EFRAG on 22 January 2024. They can be publicly commented on online until 21 May 2024. Two different drafts are available:
Initially, the second set of ESRS (the sector-specific standards) were to be adopted by the European Commission in June 2024. However, in October 2023, this plan was postponed. As things stand, the sector-specific ESRS are not due for adoption until mid-2026. The first drafts are expected in early 2025. The sector-specific standards are reporting standards for various industries. The following sectors are currently planned and will be gradually supplemented by others:
ESRS set 1 provides companies with a detailed framework for sustainability reporting, with ESRS 2 being the only standard that is mandatory for all companies. Other standards require a materiality assessment to determine their relevance. To facilitate adoption, additional adjustments for the first years of reporting have been put into place.
We recommend companies thoroughly familiarise themselves with the requirements of ESRS. By doing so, it will be possible to establish a reporting process that is proportionate and fulfils compliance requirements. At the same time, companies can receive valuable data about their processes, which can be used for targeted transformation processes to make companies fit for the future.
The European Sustainability Reporting Standards (ESRS) are EU guidelines for the standardisation of corporate sustainability reporting.
ESRS 2 is the only standard in ESRS set 1 that is mandatory for all companies.
The ESRS standardise and improve sustainability reporting by increasing the transparency and comparability of data and promoting the integration of sustainability into corporate strategies.
Do you have questions, goals, implementation ideas and / or would like to have a direct contact? We are looking forward to your message!