Standards on corporate sustainability reporting to be adopted soon
In April 2021, the European Commission adopted a legislative proposal for a Corporate Sustainability Reporting Directive (CSRD) that requires companies within its scope to report using a double materiality perspective in compliance with European Sustainability Reporting Standards (ESRS) adopted by the European Commission as delegated acts.
Companies subject to the CSRD will have to report according to the ESRS. The draft standards are developed by the EFRAG, previously known as the European Financial Reporting Advisory Group, an independent body bringing together various different stakeholders. The standards will be tailored to EU policies, while building on and contributing to international standardisation initiatives.
On 6 June the Commission opened a four-week public feedback period on the first set of the ESRS which ended on 7 July 2023. Commission adoption of the ESRS is planned for the second quarter of 2023. The new rules aim to ensure that investors and other stakeholders have access to the information they need to assess investment risks arising from climate change and other sustainability issues. According to the plans, the new rules will also create a culture of transparency about the impact of companies on people and the environment. Reporting costs are expected to be reduced for companies over the medium to long term by harmonising the information to be provided.
The reporting requirements will be phased in over time for different kind of companies. Large undertakings which are public-interest entities exceeding the average number of 500 employees during the financial year and public-interest entities which are parent undertakings of a large group exceeding on a consolidated basis the average number of 500 employees during the financial year will have to apply the standards in the financial year 2024, for reports published in 2025.
Large undertakings and parent undertakings of a large group other than those referred to above will have to apply the standards in financial year 2025, for reports published in 2026. Listed small and medium-sized undertakings are obliged to report as of 2026 and have to publish their reports in 2027. Finally, subsidiary undertakings established in the EU whose ultimate parent undertaking is governed by the law of a third country will need to publish and make accessible a sustainability report in 2029 at the group level of the parent undertaking for financial years starting on or after 1 January 2028.