EFRAG submits final drafts of European Sustainability Reporting Standards (ESRS) to EU Commission

• January 01, 2024 (first-time application of the standards in reporting 2025): large companies that are already subject to the Non-Financial Reporting Directive (NFRD) or the CSR Directive Implementation Act (CSR-RUG). 
  
• January 01, 2026 (first-time application of the standards in 2027 reporting): capital market-oriented SMEs (possibility of voluntary deferral until fiscal year 2028; separate, proportionate standards will be developed starting next year) 
• January 01, 2025 (first-time application of the standards in reporting 2026): all other large companies not subject to the NFRD or CSR-RUG  

Environment 

• Number of standards: While the original drafts included 13 standards, the number was reduced to 12 standards in the final drafts by deleting one of the two governance standards. The contents of the deleted standard were partly transferred to the cross-sector standard ESRS 2 and the remaining governance standard was renamed. The basic structure of the cross-cutting standards remains unchanged. 
• Materiality: The original draft of ESRS 1 stipulated that, based on the principle of rebuttable presumption, reporting must in principle be made on every sustainability issue unless its materiality can be rebutted by the company. This materiality definition was deleted in the final draft. Instead, ESRS 1 now specifies a number of disclosure requirements that are material and therefore mandatory in all cases. For the remaining disclosure requirements, reporting on the topics identified as immaterial in the materiality analysis can be waived.  
• Number of disclosure requirements: Compared to the original drafts, the number of disclosure requirements has been significantly reduced from 136 to 82. This is accompanied by a significant reduction in the required quantitative and qualitative data points. 

• Agriculture, livestock and fishing 
• Coal mining and extraction
• Energy and utility companies
• Food and beverage
• Motor Vehicles
• Oil and gas midstream to downstream & oil and gas upstream
• Road transportation
• Textiles, accessories, jewelry and footwear
  
  

How should companies proceed?  


To ensure efficient and structured implementation, companies should start preparing for reporting in accordance with the ESRS. The final drafts that have now been published point the way forward in terms of the granularity of the information that will have to be disclosed in the future and thus the implementation effort for companies. First of all, it is essential that management and managers from the various corporate divisions familiarize themselves with the standards and create an awareness of what the requirements mean for their own company at the operational level. In a further step, it should be determined exactly which information is already available for fulfilling the reporting obligations and for which data a collection has not yet taken place. As a result, structures and processes can be set up in a targeted manner to identify and prepare the sustainability-related information that is not yet available. Furthermore, an intensive examination of environmental, social and governance risks (ESG risks) and their management is advisable in order to facilitate the formulation of effective guidelines, targets and key figures. Finally, it is advisable to continuously monitor the standard-setting process in order to be able to react to any changes and adjustments at an early stage.