On 31 July 2023, the European Commission announced that it had adopted the European Sustainability Reporting Standards (ESRS) for use by all companies subject to the Corporate Sustainability Reporting Directive (CSRD).

The Commission has also published:

The 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. The scrutiny period runs for two months, extendable by a further two months. The European Parliament or the Council may reject the delegated act, but they may not amend it.

The ESRS will be mandatory for use by companies that are obliged by the EU Accounting Directive to report certain sustainability information. By requiring the use of common standards, the EU Accounting Directive, as amended by the CSRD, aims to ensure that companies across the EU report comparable and reliable sustainability information.

In accordance with the provisions of the EU Accounting Directive, as amended by the CSRD, the standards adopted by the Commission are based on technical advice (draft standards) from the European Financial Reporting Advisory Group (EFRAG). Earlier this year, as required by the EU Accounting Directive, the Commission consulted Member States on the draft standards submitted by EFRAG, along with various EU bodies such as the 3 European Supervisory Authorities, the European Environment Agency, the European Union Agency for Fundamental Rights, the European Central Bank, the Committee of European Auditing Oversight Bodies and the Platform on Sustainable Finance.

As required by the EU Accounting Directive, as amended by the CSRD, the ESRS take a “double materiality” perspective, obliging companies to report both on their impacts on people and the environment, and on how social and environmental issues create financial risks and opportunities for the company.

The Commission has made several modifications to the draft standards submitted by EFRAG. The modifications fall into three main categories: phasing-in certain reporting requirements (the additional phase-ins mainly apply to companies with fewer than 750 employees); making more of the reporting requirements “subject to materiality” (i.e., allowing companies to omit information if it is not relevant in their particular circumstances), as opposed to being mandatory for all companies; and making some of the proposed requirements voluntary (the Commission has converted a number of the mandatory datapoints proposed by EFRAG into voluntary datapoints).

The Commission has suggested that EFRAG prioritises the development of guidance on materiality assessment and on reporting with regard to value chains. EFRAG expects to publish draft guidance on these two issues for public consultation in the near future.

EFRAG will also shortly host a portal for technical questions that companies, or other stakeholders may have about the application of ESRS.

Companies will have to start reporting under ESRS according to the following timetable: 

  • Companies previously subject to the Non-Financial Reporting Directive 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 EUR 150 million per year in the EU and that have in the EU either a  branch with a turnover exceeding EUR 40 million 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.