Empowering Sustainability: The European Sustainability Reporting Standards (ESRS)

The European Sustainability Reporting Standards (ESRS) heralds a new era of sustainability reporting practices in the European Union (EU). With the European Commission (EC) publishing the final text of the first 12 European Sustainability Reporting Standards (ESRS), affected companies must prepare for improved sustainability reporting. For the first cohort of companies, disclosure will be required as early as the 2024 reporting period.

These pioneering standards aim to improve the quality and comparability of sustainability information published by large listed companies, in line with the EU’s ambitious Green Deal.

These reporting rules apply to large public-interest companies with a workforce of more than 500 employees. This category includes approximately 11,700 large companies and groups operating across the European Union. 

Large companies, including banks, insurance companies, and other companies designated by national authorities as public-interest entities, will have to report on the following:

• environmental matters

• social matters and treatment of employees

• respect for human rights

• anti-corruption and bribery

• diversity on company boards (in terms of age, gender, educational and professional background)

According to Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets Union: ​“The standards we have adopted today 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.”

ESRS encompass a comprehensive reporting framework that covers a broad spectrum of environmental, social, and governance issues. These include climate change, biodiversity, and human rights, amongst others. These topical standards aim to provide companies with the framework to present a holistic view of their sustainability efforts. This allows stakeholders to make informed decisions based on a new level of public transparency driven by reliable and comparable data.

Mandatory Reporting for Enhanced Transparency

A key feature of ESRS is the inclusion of mandatory reporting requirements under the Corporate Sustainability Reporting Directive (CSRD) 2. By integrating mandatory sustainability reporting into companies’ core obligations, ESRS enforces transparency and fosters accountability. Businesses must now report on environmental, social, and governance (ESG) performance. This allows them to demonstrate their commitment to sustainability and responsible practices.

Promoting Collaboration for Inclusive Standards

The development of ESRS involved extensive collaboration with stakeholders, ranging from investors and employees to civil society organisations. This inclusive approach is a decisive step to achieving standards that align with the needs and expectations of key players in the sustainability arena. The European Commission sought insights from various experts and organisations. By incorporating diverse perspectives, the credibility and legitimacy of ESRS is reinforced.

Advancing the Sustainable Agenda with ESRS

The adoption of ESRS by the European Commission signifies an exemplary stride towards advancing sustainable reporting practices across the EU. Harmonised standards promote transparency, comparability and accountability. This new enforcement will accelerate the sluggish shift of companies, disclosing their social and environmental impacts in an era of growing urgency to deliver consistent standards. By launching the ESRS, the EU is strengthening its commitment to building a sustainable and responsible economy and laying the foundations for achieving the Green Deal.