European Sustainability Reporting Standard 1: General requirements
In the course of the Corporate Sustainability Reporting Directive (CSRD), which represents a substantial extension of the Non Financial Reporting Directive (NFRD), the European Financial Reporting Advisory Group (EFRAG) was tasked with creating European Sustainability Reporting Standards (ESRS) in order to make the information published in a sustainability report comprehensible, relevant, comparable and also verifiable. The ESRS are based on the delegated regulation of the ESRS (European Sustainability Reporting Standards) which was published in the Official Journal of the EU on 22nd December 2023.
ESRS - Regulatory Background
These ESRS must be applied by companies that already fall under the scope of the NFRD starting with financial year 2024. In addition, large companies that meet two of the following three criteria will also be affected from financial year 2025:
- Balance sheet total over EUR 20 million (draft of the EU commission, 17. October 2023: EUR 25m)
- Net turnover over EUR 40 million (draft of the EU commission, 17. October 2023: EUR 50m)
- Number of employees over 250
Listed SMEs, small and non-complex credit institutions, and captive insurance companies that meet two out of three criteria will also be required to report on sustainability from financial year 2026:
- Balance sheet total over EUR 350.000 (draft of the EU commission, 17. October 2023: EUR 437.500)
- Net turnover over EUR 700.000 (draft of the EU commission, 17. October 2023: EUR 700.000)
- Number of employees over 10
Furthermore, there are requirements regarding companies from third countries, branches or permanent establishments in EU countries.
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Development of the ESRS
The EFRAG Project Task Force on European Sustainability Reporting Standards (EFRAG PTF-ESRS) started to develop the European standards in spring 2021, taking into account existing frameworks and established initiatives such as those of the Global Reporting Initiative (GRI) and the International Sustainability Standards Board (ISSB).
Since the beginning of 2022, EFRAG PTF-ESRS has published various working papers to provide insight into the intended content and structure of the standards. In June 2023, a final draft of the delegated regulation of the ESRS was published by the European Commission. In the end of December 2023, the delegated regulation was published in the official journal of the EU.
Overview European Sustainability Reporting Standards
The ESRS can be divided into the following three categories:
- cross-cutting standards
- topical standards (Environmental, Social and Governance standards)
- sector-specific standards
Currently, there are 12 sector-agnostic standards in the Delegated Regulation which must be applied by companies subject to the CSRD. This is to ensure that companies are fully transparent in disclosing their impacts on people and the environment, as well as the risks and opportunities sustainability matters have on the undertaking.
There are two cross-cutting standards:
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European Sustainability Reporting Standard 1: General requirements
On November 23, 2022, the European Financial Reporting Advisory Group (EFRAG) submitted the drafts for 12 sector-independent sustainability reporting standar...
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ESRS 2 – European Sustainability Reporting Standard 2: General disclosures
This article is based on the delegated regulation of the ESRS which was published in the Official Journal of the EU on 22nd December 2023. Here you can find ...
The topical standards can be divided into the areas of Environment, Social and Governance:
Environment
Social
ESG Advisory
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ESRS S1 – Own workforce
The ESRS S1 is one of 4 social-specific standards of the European Sustainability Reporting Standards. This article is based on the final delegated regulation...
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ESRS S2 – Workers in the value chain
The ESRS S2 is one of 4 social-specific standards of the European Sustainability Reporting Standards. The standards were developed by EFRAG and are to be app...
Further social standards:
