European Sustainability Reporting Standards (ESRS)

What do I need to know?

The EU Commission adopted the European Sustainability Reporting Standards (ESRS) on the 31st of July, 2023. It aims to make reporting on ESG and sustainability comparable and consistent with the standards of financial reporting.

The ESRS is an extension of the Corporate Sustainability Reporting Directive (CSRD) and sets new standards for ESG reporting, consisting of 12 standards.

One of the ESRS’s most important reporting principles to be aware of is Dobbelt Materiality. This means that companies must report on their business’s environmental impact as well as on the environment’s impact on their financial performance.

As for reporting on carbon emissions and energy, companies must report on their total energy consumption and carbon emissions. Following the disclosure requirements E1-5 and E1-6 under the ESRS E1: Climate Change, the energy mix, and carbon emissions covering Scope 1, 2, and 3 must be accounted for. Companies are required to report on emissions based on both the location- and market-based method. In addition, companies must account for their environmental efforts in accordance with the Paris Agreement’s limit of 1.5 °C.

Read more about the different methods to calculate emissions here.

‍Is it relevant to me?

The CSRD and ESRS expand the scope from around 11.700 companies subject to the NFRD to approximately 50.000 EU companies. As the ESRS falls under the CSRD, the same criteria are in play.

Companies that fall within the scope and check ⅔ of the following criteria:

• A net turnover of €40 million
• A balance sheet total of €20 million
• 250 employees on average during the fiscal year

Non-EU companies with a turnover of €150 in the EU are also obliged to report under the CSRD and ESRS frameworks.

How and when ESRS could affect your business depends on both size and type of business. The timeline for reporting is as follows:

• 1st of January 2024 - Companies already subject to the non-financial reporting directive (NFRD).
• 1st of January 2025 - Companies that are not presently subject to the non-financial reporting directive (NFRD).
• 1st of January 2026 - Small and medium enterprises (SMEs) listed on the stock exchange.