The European Commission Monday adopted the European Sustainability Reporting Standards (ESRS) for use by all companies subject to the Corporate Sustainability Reporting Directive (CSRD).
- The reporting requirements to be phased over time for different companies, cover the full range of environmental, social, and governance issues, including climate change, biodiversity and human rights.
- They provide information for investors to understand the sustainability impact of the companies in which they invest.
- They also take account of discussions with the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) in order to ensure a very high degree of interoperability between EU and global standards and to prevent unnecessary double reporting by companies.
- The CSRD is on track to begin applying from the beginning of 2024.
The ESRS take a “double materiality” perspective—that is to say, 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.
THE WHY: If the market for green investments is to be credible, investors need to know about the sustainability impact of the companies in which they invest. Without such information, money cannot be channelled towards environmentally friendly activities.
- The existing problems in the quality of sustainability reporting means that investors lack a reliable overview of sustainability-related risks to which companies are exposed.
- Investors increasingly should be made aware about the impact of companies on people and the environment and their plans to reduce such impacts in the future. This knowledge will help them to meet their own disclosure requirements under the Sustainable Finance Disclosure Regulation (SFDR).
WHAT THEY SAID:
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 agendaEN•••, and accordingly have access to sustainable finance.
— Mairead McGuinness
Commissioner for Financial Services, Financial Stability and Capital Markets Union
European Commission
