First set of standards submitted for final EC approval

On 22 November 2022, EFRAG submitted the first set of standards to the European Commission for final approval. The European Sustainability Reporting Standards (ESRS) are the concrete implementation of the Corporate Sustainability Reporting Directive (CSRD), the legal instrument. 

 

Below is a visual representation of the ESRS architecture.

Compared to the set that was submitted for consultation, a number of important changes have been made as a result of the feedback received:

1) Greater alignment with existing international standards
The final set shows a higher degree of alignment with the standards of the International Sustainability Standards Board (ISSB), the Global Reporting Initiative (GRI), and also with expectations regarding due diligence as described in international instruments such as the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises. GRI had already aligned its standards with these instruments in 2021. Furthermore, efforts were made to better align with the Minimum Safeguards from the EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR).

2) A more central role for the materiality assessment of the reporting organization
There was considerable feedback on the so-called 'rebuttable presumption'. This assumption implied that all standards were deemed material for every organization by default. In this version of the standards, this presumption has been removed. Some standards and disclosures are mandatory for all organizations. These include ESRS 1 and 2, E1 Climate, and parts of S1 Own workers. The obligation to report on the remaining standards (E2 through E5, S2 through S4, and G1) and disclosures depends on the double materiality assessment that the organization itself must carry out.

3) A significant reduction in the number of disclosures

In the final submitted standards, the number of disclosures has been approximately halved to 84 (1,144 data points). Additionally, the number of disclosures within the various standards has been reduced:

• A large number of disclosure requirements have been removed; some of these may return in the sector-specific standards currently being developed by EFRAG.
• Many reporting requirements will be subject to a phased implementation. This means that some requirements only need to be reported 1, 2, or 3 years after the standards come into effect.
• Reporting requirements that require data from value chain partners will not be mandatory for the first three years. During this period, organizations may rely on in-house data. This does not apply to situations where value chain data is required to comply with other EU legislation.

Getting started with the CSRD and ESRS

To get started with the CSRD/ESRS, it is first important to determine when your organization must begin reporting in accordance with the ESRS. Next, assess your current status. Based on the gap between the desired and current situation, a roadmap can then be developed.

 

Type of Organization	CSRD Obligation From	Relates to Annual Report Published In
Large, listed, or Public Interest Entity (PIE)	1 January 2024	2025 (for the 2024 reporting year)
Other large enterprises	1 January 2025	2025 (for the 2025 reporting year)
SME	1 January 2026	2027 (for the 2026 reporting year)

 

Step-by-step Plan

We recommend following these steps to develop a detailed roadmap:

Step 1: Create awareness and knowledge within the organization
Step 2: Map out the current situation
Step 3: Create an initial roadmap
Step 4: Conduct a double materiality assessment
Step 5: Perform a gap analysis and develop a detailed roadmap
Step 6: Start implementation

You don’t need to wait with implementation until everything has been mapped out. For instance, the climate standard is mandatory for all organizations within the scope of the CSRD. A fundamental requirement is the ability to measure your Scope 1, 2, and 3 GHG emissions based on the GHG Protocol.

 

Are you about to get started and could use some advice?
Feel free to contact us at info@2impact.nl.