The European Financial Reporting Standards (ESRS), which execute the requirements for companies impacted by the Corporate Sustainability Reporting Directive (CSRD), are under development by EFRAG.
This first delegated act sets out cross-cutting standards and standards for the disclosure of environmental, social and governance information.
The first draft act was published on 9 June 2023 for feedback. During the four-week feedback period, ELS Europe issued comments to the Commission on the topics of definitions, materiality assessment, the characterisiation of ‘threshold of materiality’, evaluation of impacts and dependencies, characterization of estimations and ‘proxies’, audit and assurance, the allowance of ‘opt-outs’, disclosures related to radioactive waste as well as other comments and related recommendations. ELS Europe’s detailed feedback, published on the European Commissions website, can be found here.
The feedback period closed on 7 July 2023 and the European Commission have now adopted the ESRS first batch on 31 July 2023 with the objection period ending on 30 September 2023.
The standards are expected to become effective from 2024 in the first phase of preparer companies currently are in scope for the Non-Financial Reporting Directive. The second phase roll-out in 2025 will require tens of thousands of European preparer companies to commence reporting. Over the next years, SME and sector specific standards will be developed by EFRAG aiming to require preparers to provide consistent, comparable and reliable information to data users, in particular financial market participants (FMPS).
Concurrently prudential authorities across the world are firming up on the reporting requirements of FMPs, mimicking to various degrees the EU Sustainable Finance Strategy and associated legal acquis. The essential aim of which is to ensure FMPs harvest good quality sustainability-related data from companies and share this with its customers and stakeholders so that they in turn can make informed investment and other finance-related decisions necessary to green the global economy and avert greenwashing.