European Commission adopts European Sustainability Reporting Standards

The European Commission has adopted the European Sustainability Reporting Standards (ESRS) for use by all companies subject to the Corporate Sustainability Reporting Directive (CSRD). The Commission said this marks another step forward in the transition to a sustainable EU economy. Mairead McGuinness, commissioner for financial services, financial stability and capital markets union, said: “The standards we have adopted are ambitious and are an important tool underpinning the EU’s sustainable finance agenda. They strike the right balance between limiting the burden on reporting companies while at the same time enabling companies to show the efforts they are making to meet the green deal agenda, and accordingly have access to sustainable finance.” According to the Commission, the standards cover the full range of environmental, social and governance issues – including climate change, biodiversity and human rights – providing information for investors to understand the sustainability impact of the companies in which they invest. The Commission stressed that it takes account of discussions with the International Sustainability Standards Board and the Global Reporting Initiative “in order to ensure a very high degree of interoperability between EU and global standards and to prevent unnecessary double reporting by companies”. The Commission made a number of modifications to the draft standards submitted by EFRAG. It said the modifications ensure that the standards are proportionate, without undermining the achievement of the policy objectives. The modifications fall into three main categories: phasing in certain reporting requirements; giving companies more flexibility to decide exactly what information is relevant in their circumstances; and making some of the proposed requirements voluntary. Looking forward, the ESRS delegated act adopted by the Commission will be formally transmitted in the second half of August to the European Parliament and to the Council for scrutiny. Companies will have to start reporting under ESRS according to the following timetable: Companies previously subject to the Non-Financial Reporting Directive (large listed companies, large banks and large insurance undertakings with more than 500 employees), as well as large non-EU listed companies with more than 500 employees: financial year 2024, with first sustainability statement published in 2025. Other large companies, including other large non-EU listed companies: financial year 2025, with first sustainability statement published in 2026. Listed SMEs, including non-EU listed SMEs: financial year 2026, with first sustainability statements published in 2027. However, listed SMEs may decide to opt out of the reporting requirements for a further two years. The last possible date for a listed SME to start reporting is financial year 2028, with first sustainability statement published in 2029. In addition, non-EU companies that generate over €150m per year in the EU and that have in the EU either a branch with a turnover exceeding €40m or a subsidiary that is a large company or a listed SME will have to report on the sustainability impacts at the group level of that non-EU company as from financial year 2028, with first sustainability statement published in 2029. Separate standards will be adopted specifically for this case.

European Commission adopts European Sustainability Reporting Standards

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