Global/EU-ESRS (CSRD)

The CSRD and ESRS are expected to have a significant impact on companies in the European Union.

They will require companies to provide more comprehensive and detailed information about their sustainability performance, which will be of interest to investors, lenders, and other stakeholders.

The EU Standards

ESRS 1 - General principles - Overarching sustainability reporting requirements covering disclosure principles, presentation, consolidation etc.
ESRS 2 - General, strategy, governance, materiality - Covers sustainability strategy, governance, materiality assessment, targets etc.
ESRS E1 - Climate change - Disclosures concerning climate mitigation, adaptation, transition plans etc.
ESRS E2 - Pollution - Reporting on pollution, circular economy, food waste, biodiversity etc.
ESRS E3 - Water and marine resources - Metrics on water usage, water bodies pollution, marine ecosystems etc.

ESRS E4 - Biodiversity - Biodiversity protection, ecosystem restoration, sustainable land use etc.
ESRS E5 - Company's use of resources - Circular economy and managing the depletion of non-renewable resources and the regenerative production of renewable resources principles
ESRS S1 - Own workforce - Metrics on workforce composition, working conditions, training, wellbeing etc.
ESRS S2 - Workers in the value chain - Labour rights, fair wages, health and safety across supply chains etc.
ESRS S3 - Affected communities - Community relations, impact of operations, public policy positions etc.
ESRS G1 - Governance, risk management - Sustainability governance, risk management integration, remuneration etc.

Companies they apply to

All large companies with more than 250 employees. This includes listed and non-listed companies across all sectors.
Listed small and medium-sized enterprises (SMEs) - companies listed on EU regulated markets, except micro enterprises.
Banks and insurance companies - including companies supervised under the EU's banking and insurance regulations.

All companies established in the EU. Additionally, non-EU companies with operations in the EU exceeding certain thresholds will also need to comply.
The standards will apply to consolidated reporting for entire corporate groups, including activities outside the EU.

ESRS 1 - General principles - Overarching sustainability reporting requirements covering disclosure principles, presentation, consolidation etc.
ESRS 2 - General, strategy, governance, materiality - Covers sustainability strategy, governance, materiality assessment, targets etc.
ESRS E1 - Climate change - Disclosures concerning climate mitigation, adaptation, transition plans etc.
ESRS E2 - Pollution - Reporting on pollution, circular economy, food waste, biodiversity etc.
ESRS E3 - Water and marine resources - Metrics on water usage, water bodies pollution, marine ecosystems etc.

ESRS E4 - Biodiversity - Biodiversity protection, ecosystem restoration, sustainable land use etc.
ESRS E5 - Company's use of resources - Circular economy and managing the depletion of non-renewable resources and the regenerative production of renewable resources principles
ESRS S1 - Own workforce - Metrics on workforce composition, working conditions, training, wellbeing etc.
ESRS S2 - Workers in the value chain - Labour rights, fair wages, health and safety across supply chains etc.
ESRS S3 - Affected communities - Community relations, impact of operations, public policy positions etc.
ESRS G1 - Governance, risk management - Sustainability governance, risk management integration, remuneration etc.

All large companies with more than 250 employees. This includes listed and non-listed companies across all sectors.
Listed small and medium-sized enterprises (SMEs) - companies listed on EU regulated markets, except micro enterprises.
Banks and insurance companies - including companies supervised under the EU's banking and insurance regulations.

All companies established in the EU. Additionally, non-EU companies with operations in the EU exceeding certain thresholds will also need to comply.
The standards will apply to consolidated reporting for entire corporate groups, including activities outside the EU.

Timeline for compliance

Companies will be required to comply with ESRS standards for their sustainability reporting from financial years starting in 2024, or 2025 at the latest. Though specific sector standards are to be expected, they have been delayed.

EU member states will be required to translate the standards into national legislation and establish regulatory oversight and enforcement mechanisms.

Estimates suggest ESRS standards may apply to around 49,000 companies across the EU when fully in effect.

Exemptions

Exemptions are limited to micro enterprises and captive insurers in certain circumstances. All other in-scope companies will be legally required to report under ESRS. France is the first EU country to enact the Directive and outline penalties for non compliance. CSRD will be the cornerstone of global sustainability reporting, expected to shift the world from a public relations focused reporting process toward quantifiable integrated financial reporting.