News Brief
The European Sustainability Reporting Standards (ESRS) have been adopted by the European Commission. These standards will be used by all companies subject to the Corporate Sustainability Reporting Directive (CSRD).
CSRD is an EU directive that mandates all large companies and all listed companies (except listed micro-enterprises) to disclose information on social and environmental issues - including the risks and opportunities for the company as well as the impact of the companies’ activities on people and the environment. This helps investors, civil society organisations, consumers, and other stakeholders to evaluate the sustainability performance of companies. [1]
ESRS supports the CSRD by providing common and mandatory standards for the companies within its scope to fulfill their legal sustainability reporting obligations. It helps companies communicate and manage their sustainability performance more efficiently and therefore have better access to sustainable finance. [1]
Some features of the ESRS -
- Covers the full range of environmental, social, and governance issues, including climate change, biodiversity, and human rights. [1]
- Ensures a high degree of interoperability between EU and global standards, including the standards of the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI). [1]
- Takes a “double materiality” perspective. They oblige 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. [1]
- It is comprised of 12 standards. Two cross-cutting standards provide general reporting concepts and include overarching disclosure requirements including multiple datapoints. Ten topical standards complement these with detailed disclosure requirements across environmental, social, and governance topics. [2]
- Contains a series of clearly identified datapoints that correspond to specific information that financial market participants, benchmark administrators, and financial institutions need for their own reporting purposes respectively under the Sustainable Finance Disclosure Regulation (SFDR), the Benchmark Regulation (BMR) or the “pillar 3” disclosure requirements under the Capital Requirements Regulation (CRR). [1]
References
- European Commission - Questions and Answers on the Adoption of European Sustainability Reporting Standards
- KPMG Insights - First set of ESRSs is now out!
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