After a resolution that aimed to curb the European Sustainability Reporting Standards (‘ESRS’) was denied in October, the European Parliament approved the launch of the first set of 12 sector agnostic ESRS.
The ESRS are the reporting standards according to which the companies in scope of the Corporate Sustainability Reporting Directive (‘CSRD’) shall disclose sustainability-related information to their stakeholders.
This Directive, one of Europe’s core instruments to achieve its objectives under the Green Deal, was adopted in November 2022 and requires companies to publish information on environmental, social and governance (‘ESG’) matters from 2025 (based on 2024 data) onwards.
The reporting obligations under the CSRD and its accompanying ESRS apply to large EU companies and to non-EU entities with large subsidiaries or substantial activity in the European Union.
European Commission Adjustments
With CSRD deadlines around the corner and taking into account the costs and challenges of running a business today, the European Commission published a number of proposals aiming to reduce the reporting burden for companies.
Firstly, the Commission proposed to alter the thresholds determining which companies fall under the CSRD, reducing its scope to companies exceeding two out of the three following criteria:
Net turnover of at least €40 million
Net turnover of at least €50 million
Balance sheet total of over €20 million
Balance sheet total of over €25 million
More than 250 employees
More than 250 employees
For companies only nearly meeting these criteria, it is advised to promptly start preparing for compliance with the CSRD as well.
A second proposed adjustment relates to the postponement of the deadline for the adoption of the planned additional, sector specific ESRS for a period of 2 years.
The aim is to hold back the demands of such additional sector specific standards for a couple of years, allowing companies to focus on the implementation of the first set of ESRS and providing them with more time to focus on the core reporting requirements.
It is important to keep in mind, however, that the first set of 12 general ESRS remains applicable to all companies under the CSRD and that the concrete reporting requirements contained in these standards remain unchanged.
From Political Debate to Concrete Implementation
The first set of ESRS is now integrated in the EU legal framework. The endorsement of the ESRS by the European Parliament marks the transition from political debate to concrete implementation of these new standards. This is a true milestone in the progress of ESG reporting, enabling investors and other stakeholders to make informed decisions, promoting transparency and contributing to the EU’s sustainability goals. In combination with the adjustments proposed by the Commission, this is bound to be a game changer for corporate accountability within the European Union and well beyond.