ESRS: European Sustainability Reporting Standards Overview

The European Sustainability Reporting Standards (ESRS) form a comprehensive framework established by the European Union to standardize sustainability disclosures across companies. Developed under the Corporate Sustainability Reporting Directive (CSRD), the ESRS aim to enhance transparency and comparability in environmental, social, and governance (ESG) reporting.​

What Are the ESRS?

The ESRS are a set of 12 standards that provide detailed reporting requirements for companies on various ESG topics. These standards are designed to ensure that companies disclose relevant sustainability information, facilitating informed decision-making by investors and stakeholders. The ESRS cover a broad range of topics, including climate change, biodiversity, human rights, and governance practices.​

Key Features of the ESRS

Double Materiality

A central concept in the ESRS is “double materiality,” which requires companies to report on:​

• Impact Materiality: How the company’s operations affect the environment and society.
• Financial Materiality: How sustainability issues impact the company’s financial performance.​

This approach ensures a comprehensive view of a company’s sustainability performance.​

Comprehensive Coverage

The ESRS encompass a wide array of ESG topics, structured as follows:​

• General Standards:
  • ESRS 1: General Requirements
  • ESRS 2: General Disclosures
• Environmental Standards:
  • 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
• Social Standards:
  • ESRS S1: Own Workforce
  • ESRS S2: Workers in the Value Chain
  • ESRS S3: Affected Communities
  • ESRS S4: Consumers and End-users
• Governance Standards:
  • ESRS G1: Business Conduct​

Each standard outlines specific disclosure requirements to ensure detailed and meaningful reporting.​

Alignment with Global Frameworks

The ESRS are designed to align with international sustainability reporting frameworks, such as the Global Reporting Initiative (GRI) and the International Sustainability Standards Board (ISSB). This alignment facilitates consistency and comparability in sustainability reporting on a global scale.​

Who Is Affected by the ESRS?

The ESRS apply to companies subject to the CSRD, which includes:​

• Large companies meeting two of the following criteria:
  • More than 250 employees
  • Net turnover exceeding €40 million
  • Total assets over €20 million
• All companies listed on EU regulated markets, except micro-enterprises

The reporting requirements will be phased in over time, with the first reports expected for the 2024 financial year, published in 2025.​

Preparing for ESRS Compliance

To comply with the ESRS, companies should:

• Conduct a Double Materiality Assessment: Identify and evaluate the ESG topics that are material from both impact and financial perspectives.
• Develop Robust Data Collection Systems: Establish processes to gather accurate and comprehensive sustainability data across operations and the value chain.
• Integrate ESG into Corporate Strategy: Embed sustainability considerations into business models and decision-making processes.
• Engage Stakeholders: Communicate with investors, customers, and other stakeholders about sustainability goals and performance.​

Conclusion

The European Sustainability Reporting Standards represent a significant advancement in corporate sustainability reporting, promoting transparency, accountability, and comparability. By adhering to the ESRS, companies can better understand and communicate their sustainability impacts, risks, and opportunities, ultimately contributing to a more sustainable economy.