The EU’s Corporate Sustainability Reporting Directive (CSRD), which came into force in January 2023, places corporate sustainability reporting alongside traditional financial reporting as an integral part of a company’s financial statements and annual report. This is a significant change that sets the direction for the future of corporate reporting in companies of all sizes.
The ESRS standards (European Sustainability Reporting Standards) under the directive define the information that companies must report regarding their sustainability impacts, risks, and opportunities related to the environment, society, and governance, as deemed material by the company. The European Commission has published two cross-sector standards applicable to all companies within the scope of the directive, along with 10 topic-specific standards that apply to companies based on their materiality assessment, regardless of their industry. The sector-specific standards are expected to be released by the Commission in the summer of 2024.
The Corporate Sustainability Reporting Directive (CSRD) will be implemented in phases. In the first phase, the directive’s corporate sustainability reporting will apply to companies with over 500 employees, which are already reporting non-financial information under Chapter 3 of the Accounting Act. These companies must begin collecting data in accordance with the CSRD for their 2024 financial year.
In the second phase, the sustainability reporting directive will be expanded to include companies that meet at least two of the following three criteria: the company has more than 250 employees, its turnover exceeds €40 million, or its balance sheet exceeds €20 million. These companies must begin collecting data in accordance with the ESRS standards for their 2025 financial year, meaning practically from the beginning of 2025. The changes brought about by the directive will particularly affect these new companies entering the scope of sustainability reporting.
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ESRS 1 General Requirements
In the first part of the standard series, ESRS 1 General Requirements, the structure of the ESRS standards is outlined, the drafting methods and basic concepts are explained, and the general requirements for the preparation and presentation of sustainability-related information are set. ESRS 1 includes several key principles that are significant for corporate sustainability reporting, which are worth briefly examining here.
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Impacts, opportunities, and risks
Impacts, opportunities, and risks are key concepts throughout the entire ESRS standard series. Impacts refer to the positive and negative sustainability-related effects of the company’s business activities on people and the environment, as defined in the materiality assessment (see next section). Risks and opportunities refer to sustainability-related financial risks and opportunities for the company, as defined in the assessment of financial materiality. Together, the terms impacts, risks, and opportunities also reflect the double materiality perspective of the ESRS standards, which encompasses not only impacts and risks but also opportunities.
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Materiality Assessment
The starting point for sustainability reporting under the ESRS standards is the materiality assessment. The materiality of a sustainability matter consists of its impact materiality and financial materiality. A sustainability matter is considered materially impactful when it relates to the company’s positive or negative effects on people or the environment, concerning environmental, social, or governance issues. This impact assessment also applies to the company’s value chain, products, services, and business relationships. In the case of positive impacts, the scale, scope, and likelihood of the impacts are particularly important in the assessment.
The starting point for sustainability reporting under the ESRS standards is the materiality assessment.
A sustainability matter is considered financially material if it causes, or is expected to cause, significant effects on the company—such as when it leads to risks or opportunities that have a material impact on the company’s development, financial position, performance, cash flows, access to finance, or cost of capital. This assessment of financial materiality is not limited to matters under the company’s direct control.
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Double materiality
Double materiality is a central component of the Corporate Sustainability Reporting Directive (CSRD). It considers not only the company’s own impacts on people and the environment, but also the effects of external factors—such as stakeholder expectations or technological developments—on the company and its financial performance. Thus, double materiality includes both impact materiality and financial materiality dimensions.
In addition to the core concepts that guide the entire standard series, this general sustainability reporting standard also provides guidance on topics such as the relationship between the reporting company and its value chain, the time horizons relevant to reporting, and the detailed content and structure of the sustainability statement, including its links to the company’s financial statements. A fundamental principle is that the information presented in the report must be relevant, faithfully represented, comparable, verifiable, and understandable.
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ESRS 2 General Disclosures
The ESRS 2 General Disclosures standard sets out the disclosure requirements that all companies falling under the directive must report at a general level regarding all material sustainability matters. These include information related to the company’s governance, strategy, and the management of impacts, risks, and opportunities, as well as the related metrics and targets.
The standard provides guidance on, among other things, the general principles for preparing sustainability statements (i.e. sustainability reports). Regarding corporate governance, the standard aims to give readers of the sustainability report an understanding of how the company’s sustainability matters are monitored, managed, and overseen, and with what resources. This includes, for example, the roles and responsibilities of the company’s governance bodies and management in the processes for managing material impacts, risks, and opportunities. Key aspects of these governance processes include information flows, risk management, and internal control.
The section of the standard dealing with the company’s strategy aims to describe the key factors related to sustainability matters, the business model, and the value chain. It also seeks to provide an understanding of how stakeholder interests and perspectives influence the company and how they are incorporated into its strategy and business model. This section also aims to clarify how the material impacts, risks, and opportunities identified through the company’s materiality assessment interact with and arise from the company’s strategy and business model.
The company’s materiality assessment of sustainability matters is a key part of managing impacts, risks, and opportunities. The objective of the standard is to provide users of the sustainability statement with an understanding of the processes through which the company identifies and assesses the materiality of these sustainability-related impacts, risks, and opportunities. This includes, for example, reporting on the data used in the sustainability statement and disclosing which information was excluded. In addition, the metrics related to material sustainability matters—along with the underlying rationale and assumptions—must also be reported.
Complying with and fulfilling the disclosure requirements set out in ESRS 2 General Disclosures requires significant effort—especially when done for the first time—particularly in the areas of materiality assessment and the identification of impacts, risks, and opportunities. These must be examined in relation to the company’s stakeholders, value chain, strategy, and business model, along with all associated governance processes. However, this is by no means an insurmountable task. When carried out thoroughly, it provides a strong foundation for the company’s ongoing reporting efforts and helps determine which topic-specific standards must be applied in the company’s sustainability reporting. The topic-specific standards will be addressed in the next section.
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Topic-specific ESRS Standards
The topic-specific standards address individual sustainability themes, each divided into topics and subtopics. These standards are sector-agnostic, meaning they apply regardless of the company’s industry. The topic-specific requirements complement the general-level disclosures outlined in ESRS 2 General Disclosures. It is important to note that the use of topic-specific standards is entirely based on the company’s materiality assessment. A company is only required to report on the matters covered in the topic-specific standards that it has identified as material sustainability matters in its assessment.
The use of topic-specific standards is entirely based on the company’s materiality assessment.
ESRS E1 Climate Change
In this most extensive part of the topic-specific standards series, the goal is to understand how the company impacts climate change, what actions it has taken and plans to take to mitigate climate change, how prepared the company is to adapt its strategy and business model to limit global warming to 1.5°C, and what actions it has implemented—along with their outcomes—to prevent, reduce, or remedy the negative impacts of climate change on the company itself. The standard also covers understanding the nature, type, and magnitude of risks and opportunities arising from the company’s impacts on and dependencies related to climate change. Additionally, the company must report whether it considers climate-related aspects in the incentive schemes of its administrative, management, and supervisory bodies, and if so, how.
The company must disclose its climate change mitigation transition plan. Regarding greenhouse gas (GHG) emission reduction targets, the company must explain how its targets align with the goal of limiting global warming. Additionally, if applicable, the company must report how it plans to phase out coal and provide both qualitative and quantitative information on its investments and financing that support the implementation of the transition plan. The company must also disclose any significant capital expenditure related to coal, oil, and gas during the reporting period. If the company does not have a transition plan, it must state whether it intends to adopt one, and if so, when.
The company must describe in its reporting how climate-resilient its strategy and business model are, as well as when, how, and to what extent its resilience analysis has been conducted, and what the results of this analysis are. The company must also explain its process for identifying and assessing climate-related impacts, risks, and opportunities, including physical climate risks in its own operations and across its value chain—particularly the identification of climate-related hazards. This includes an assessment of how the company’s assets and operations may be exposed or sensitive to these climate-related hazards.
If a company has set greenhouse gas (GHG) emission reduction targets, it must disclose them as absolute values—either in tonnes of CO₂ equivalent or as a percentage relative to a base year’s emissions. The targets must cover Scope 1, Scope 2, and Scope 3 emissions, reported either separately or in combination. The emission reduction targets must include target values for at least the year 2030, and, if available, for 2050. The company must also disclose whether the targets are science-based and whether they are aligned with the goal of limiting global warming to 1.5°C.
Regarding energy consumption, the reporting must include information on the company’s total energy use and its energy mix. This must specify the total consumption of energy from fossil sources, as well as the share of nuclear and renewable energy sources in the company’s overall energy consumption. In addition, the company must disclose its energy intensity, i.e., total energy consumption in relation to its revenue.
The company must disclose its energy intensity, i.e., total energy consumption in relation to its revenue.
The company must also report on greenhouse gas removals financed through carbon offsetting, i.e., its climate mitigation projects. These include, for example, GHG removals and storage achieved through the company’s own actions, through projects it has supported within its value chain, as well as climate mitigation projects outside its value chain that the company has financed by purchasing carbon credits.
The standard is extensive and comprehensive, and the topics presented here represent only a portion of its full content.
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ESRS E2 – Pollution
The objective of this standard is to understand the positive and negative impacts that the company has on pollution of air, water, and soil, the prevention and mitigation of harmful effects, and the measures the company has taken to address the related risks and opportunities. It also covers the financial effects on the company resulting from the impacts and dependencies related to pollution.
When a company conducts a materiality assessment for environmental topics, it must evaluate the materiality of pollution within its own operations and across its value chain. This assessment can follow four steps based on the so-called LEAP approach, which includes:
- Locate the company’s interfaces with the environment
- Evaluate the impacts and dependencies
- Assess the risks and opportunities
- Prepare the appropriate disclosures
As selected examples of required disclosures, the company must report, among other things, whether it has screened its sites and operations to identify actual and potential pollution-related impacts, and whether it has conducted consultations, particularly with communities affected by these impacts.
The company must also describe its policies for managing material impacts, risks, and opportunities related to the prevention and reduction of pollution, as well as disclose the actions taken and the resources allocated for their implementation. The company may also report on the restoration of polluted ecosystems.
The company must disclose the pollution-related targets it has set. These targets may be either mandatory (regulatory) or voluntary. The company must also report the anticipated financial effects of material pollution-related risks and opportunities.
In addition, the company must disclose the pollutants it generates in its own operations, as well as the microplastics it produces or uses. The information on microplastics must include those that are generated or used during production processes, those that are purchased, and those that leave the company’s facilities as emissions, products, or as part of products or services. Microplastics may be unintentionally generated, for example when larger plastics such as car tires or synthetic textiles wear down, or they may be intentionally produced and added to products for specific purposes, such as exfoliating beads in facial or body scrubs.
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ESRS E3 – Water and Marine Resources
The objective of the standard is to provide an understanding of how the company impacts water and marine resources, what actions it has taken to protect these resources, and whether the company contributes to the goals of the European Green Deal regarding clean air, clean water, healthy soil, and biodiversity. The company must also disclose what plans and capabilities it has to adapt its strategy and business model to support these objectives, and whether its operations involve material risks and opportunities related to water and marine resources.
Topics related to water and marine resources covered in this standard (as well as in other ESRS standards under the CSRD directive) are also addressed across multiple standards to provide a comprehensive overview of the related sustainability issues. For example, ESRS E1 Climate Change covers acute and chronic physical risks arising from climate change-related water and ocean hazards, such as rising water temperatures, changes in precipitation levels and patterns, hydrological variability linked to rainfall, ocean acidification, and sea level rise.
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ESRS E4 – Biodiversity and Ecosystems
The objective of the standard is to understand how companies impact biodiversity and ecosystems, and how their operations contribute to drivers of biodiversity loss and the degradation or destruction of ecosystems. It also aims to assess the companies’ plans and capabilities to adapt their strategies and business models in a way that respects planetary boundaries and aligns with the EU Biodiversity Strategy to 2030. According to the standard, companies must also address the nature, type, and magnitude of risks, dependencies, and opportunities related to biodiversity and ecosystems, as well as how these are managed.
The company must report how its impacts, dependencies, risks, and opportunities related to biodiversity and ecosystems arise from its strategy and business model, and how they influence the adaptation of that strategy and business model.
The company must describe the resilience of its strategy and business model in relation to biodiversity and ecosystems.
The company must describe the resilience of its strategy and business model in relation to biodiversity and ecosystems. The description must include the following aspects:
- An assessment of how the current business model and strategy withstand physical, transition, and systemic risks related to biodiversity and ecosystems
- Stakeholder engagement, including, where relevant, the involvement of indigenous peoples and local communities.
The company must also describe the processes it uses to identify material impacts, risks, dependencies, and opportunities. The description of the process must include information on the extent to which and how the company has identified and assessed actual and potential impacts on biodiversity and ecosystems at the locations of its own operations and across different stages of its value chain, as well as the criteria used in these assessments.
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ESRS E5 – Resource Use and Circular Economy
The objective of this standard is to help users of the sustainability statement understand the company’s material positive and negative impacts on resource use, resource efficiency, and the sustainable use of renewable natural resources, i.e. the circular economy. It also aims to ensure that users are informed about the actions taken by the company and their outcomes in preventing or reducing the harmful effects caused by resource use. Additionally, the standard focuses on the company’s efforts to decouple growth from material use.
The standard states that a company’s impacts on resource use and the circular economy may have consequences for people and communities. Efficient use of resources and alignment with the principles of the circular economy also support the company’s competitiveness and economic well-being.
The company must, among other things, describe the processes it uses to identify material impacts, risks, and opportunities related to resource use and the circular economy, particularly regarding resource inflows and outflows as well as waste. It must also disclose information on the following:
- Whether the company has screened its assets and operations to identify actual and potential impacts, risks, and opportunities in its own activities and across its value chain, and if so, what methods, assumptions, and tools were used in the screening
- Whether the company has conducted consultations, particularly with communities affected by the impacts, and if so, how these consultations were carried out.
The company must also disclose whether its policies include a shift away from the use of primary resources, including the increased use of recycled materials and the sustainable sourcing and use of renewable natural resources. In addition, the company may disclose whether its actions and resources cover the following aspects, and if so, how they are addressed:
- Improved resource efficiency
- Increased use of secondary raw materials
- Circular design that enhances product durability and use optimization, and increases reuse, repair, refurbishment, and remanufacturing
- Application of business models based on circular economy principles, such as value-retention activities (maintenance, repair)
- End-of-life activities (recycling, reprocessing, extended producer responsibility)
- Waste prevention measures across the company’s value chain.
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ESRS S1 – Own Workforce
The objective of ESRS S1 – Own Workforce is to understand how a company impacts its own workforce and what actions are being taken to prevent and remedy potential negative impacts. The standard also helps to clarify the nature, type, and magnitude of risks and opportunities related to the company’s impacts on and dependencies on its own workforce, as well as how these are managed. From an economic perspective, the standard aims to shed light on the financial implications of the company’s material risks and opportunities that arise from its impacts on and dependencies on its own workforce.
To achieve these objectives, the standard requires a disclosure of the company’s general approach used to identify and manage impacts on its own workforce regarding the following aspects:
- Working conditions and terms of employment, including job security, working hours, adequate wages, social dialogue, freedom of association, collective bargaining, work-life balance, and workers’ health and safety
- Equal treatment and equal opportunities for all, including gender equality and equal pay for work of equal value, training and skills development, employment and inclusion of persons with disabilities, measures to prevent violence and harassment in the workplace, and diversity
- Other work-related rights, including those related to child labour, forced labour, adequate housing, and privacy
The company must also provide an explanation of how such impacts and its dependence on its own workforce may give rise to material risks or create opportunities for the company. For example, discrimination against women in recruitment may reduce the company’s ability to attract skilled labour.
The company must also provide an explanation of how such impacts and its dependence on its own workforce may give rise to material risks or create opportunities for the company.
The objective of the standard is also to provide users of the sustainability statement with an understanding of the extent to which the company’s operations are aligned with and adhere to international and European human rights instruments and agreements. These include, among others, the International Bill of Human Rights, the UN Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises, the ILO Declaration on Fundamental Principles and Rights at Work, the UN Convention on the Rights of Persons with Disabilities, the European Convention on Human Rights, the revised European Social Charter, the Charter of Fundamental Rights of the European Union, the priorities established in the European Pillar of Social Rights, and EU legislation, including EU labour law.
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ESRS S2 – Workers in the Value Chain
The objective of the standard is to understand the material impacts, risks, and opportunities related to workers in the value chain that arise from the company’s own operations, its value chain, and its business relationships. The aim is to identify any positive and negative impacts the company may have on value chain workers, the measures it takes to prevent and mitigate negative impacts, and the risks and opportunities the company faces in relation to these workers.
The standard requires companies to disclose their overall approach to identifying and managing material impacts on value chain workers, particularly regarding working conditions—such as job security, working hours, adequate wages, occupational health and safety—and equal treatment and opportunities, including gender equality and equal pay for work of equal value. The standard also requires a description of how such impacts and dependencies on value chain workers may create material risks or opportunities for the company. Negative impacts on value chain workers may, for example, disrupt business operations if consumers refuse to buy the company’s products. On the other hand, respecting workers' rights and implementing support programs for them may enhance business opportunities by improving supply reliability or attracting more customers.
The company must report all value chain workers who are likely to be subject to material impacts resulting from the company’s operations. In addition, the company must provide information on these workers, including whether they are individuals working at the company’s site but who are not part of the company’s own workforce—that is, they are not self-employed or employees provided primarily by third-party companies engaged in employment services—or whether they are workers employed by communities at the upstream or downstream ends of the value chain. Upstream workers may include, for example, those involved in mineral extraction, while downstream workers may include those employed by logistics service providers or franchise operators.
The company must provide information on how the interests, perspectives, and rights—including the respect for their human rights—of value chain workers who may be subject to material impacts from the company are taken into account in the company’s strategy and business model. Value chain workers are a key stakeholder group affected by the company’s operations.
The company must also describe its human rights policy commitments relevant to value chain workers, including the processes and mechanisms it uses to monitor compliance with the UN Guiding Principles on Business and Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, or the OECD Guidelines for Multinational Enterprises.
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ESRS S3 Affected Communities
This standard aims to provide information about the communities affected by the company. The company must report, among other things, how the views, interests, and rights of the affected communities — including respect for their human rights and, where applicable, their rights as Indigenous peoples — are taken into account in the company’s strategy and business model. Affected communities are a key stakeholder group for the company.
Affected communities are a key stakeholder group for the company.
The company must disclose the extent to which the impacts on and dependencies on local communities result from its strategy and business models, and how the risks and opportunities arising from these are related to them.
The company must provide a brief description of the types of communities affected by its own operations or value chain. This includes specifying whether they are communities that live or work near the company’s sites, factories, facilities, or other physical operations, or whether they are communities affected by the operations of these locations, such as downstream water pollution, communities in the value chain, or Indigenous Peoples' communities, for example, near mining sites or around waste management or recycling facilities. The company must also address whether its operations have significant large-scale and systemic negative impacts on these communities and disclose the measures it takes to enhance positive impacts on them. Additionally, the company must report how the perspectives of these affected communities are considered in its decisions and actions.
To achieve the objectives of the standard, the company is required to disclose its general approach to identifying and managing impacts on affected communities. This disclosure must include, among other things:
- The economic, social, and cultural rights of communities, such as adequate housing, sufficient food, water, and sanitation.
- The civil and political rights of communities, such as freedom of expression and freedom of assembly.
- The specific rights of indigenous peoples, such as self-determination and cultural rights.
The standard also requires a disclosure of how such impacts on and dependencies related to affected communities may pose material risks or create opportunities for the company. For example, constructive relationships may generate business benefits such as stable and conflict-free operations.
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ESRS S4 Consumers and End-users
The objective of the standard is to understand the relationships and impacts between the company and its consumers and end-users. This includes identifying the material positive and negative impacts the company has on consumers and end-users of its products and services, the actions the company has taken to prevent potential adverse impacts, and the possible financial effects that the relationships between the company and its consumers and end-users may have on the company.
The company must disclose how the interests, views, and rights of consumers and end-users—including the respect for their human rights—are taken into account in the company’s strategy and business model. Consumers and end-users are a key group of stakeholders affected by the company’s activities.
The company must, among other things, provide an explanation of its approach to identifying and managing actual or potential material impacts related to its products and services on consumers and end-users, such as:
- Impacts on consumers and end-users, such as privacy, freedom of expression, and access to information
- The personal safety of consumers and end-users
- The social inclusion of consumers and end-users, such as non-discrimination, accessibility of products and services, and responsible marketing practices.
Likewise, the company must consider and disclose how such impacts and dependencies related to consumers and end-users may pose material risks or create opportunities for the company. For example, trust in products and services may generate business benefits, such as increased sales and an expanded customer base.
The company must, among other things, disclose whether its own operations or those within its value chain involve consumers and end-users who are particularly vulnerable to impacts on their health or privacy, or susceptible to marketing and sales strategies—such as children or individuals in economically vulnerable positions.
The company must, among other things, disclose whether its own operations or those within its value chain involve consumers and end-users who are particularly vulnerable.
The company must also disclose its processes for engaging with consumers and end-users regarding the impacts it has on them. In this context, the company must provide information on, among other things, which party within the company holds operational responsibility for ensuring that such engagement takes place and how the outcomes of this engagement are taken into account in the development of the company’s operations.
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ESRS G1 Business Conduct
In the final part of the topic-specific, sector-agnostic standard series, the company must provide information that enables users of its sustainability statement to understand the company’s strategy and approach, processes, procedures, and performance. This standard focuses on business conduct, which it considers to include:
- Business ethics and corporate culture, including anti-corruption and anti-bribery measures, protection of whistleblowers, and animal welfare
- Relationships with suppliers, including payment practices, particularly regarding payments to small and medium-sized enterprises, and
- The company’s activities and commitments related to political engagement and lobbying practices.
With regard to the company’s administrative, management, and supervisory bodies, the standard requires the company to address in its report their role and expertise in matters related to business conduct.
The company must explain how it fosters its corporate culture. This must include how the company creates, develops, promotes, and evaluates it. Corporate culture, as defined in the standard, includes mechanisms through which the company identifies, reports, and investigates concerns related to unlawful activities and violations of internal rules, and how the company considers reports from both internal and external stakeholders in this process. Corporate culture also encompasses how the company protects whistleblowers, what policies it has in place regarding animal welfare, and how it conducts internal training on business conduct. The company should also identify its internal operations that are most susceptible to corruption and bribery.
The company must also report how it manages its relationships with goods and service suppliers and how this affects its supply chains—that is, how the company conducts its procurement process, including fair practices towards suppliers. The company must also provide a description of its policies aimed at preventing delays in payments, particularly to small and medium-sized enterprises. Additionally, the company must disclose the average time it takes to pay invoices and provide a description of its standard payment terms.
The company must also provide a description of its policies aimed at preventing delays in payments, particularly to small and medium-sized enterprises.
The aim of the standard is also to increase transparency regarding the company’s activities and commitments related to exerting political influence through donations and lobbying. Therefore, the company must disclose the total value of monetary or in-kind donations made directly or indirectly for political purposes. A political donation refers to support given in cash or in-kind directly to political parties, their elected representatives, or individuals seeking political office. Donations made for political purposes via intermediary organizations, such as lobbyists or charitable organizations, must also be reported.
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In Conclusion
The ESRS standards, established under the Corporate Sustainability Reporting Directive (CSRD), represent a truly comprehensive framework for the future of corporate sustainability reporting. If this framework were to be summed up in five words, they would be: materiality, opportunity, transparency, community, and digitalisation. The ESRS standards elevate sustainability reporting to an entirely new level, making it a core part of the daily operations of all large companies. Sooner or later, this will inevitably affect small and medium-sized enterprises (SMEs) as well—especially when they are, or aspire to become, part of the supply chains of ESRS-reporting companies.
Materiality and impact assessment will increasingly compel companies to look beyond their own bubble and consider issues from perspectives other than purely financial ones. This new norm is creating a closer connection between companies and the society and environment around them. It represents a significant opportunity—one from which all parties can benefit.
A strong and trustworthy relationship requires transparency and openness. A company that operates responsibly and sustainably has no reason to hide its practices. Active dialogue with stakeholders and open communication enable the building of trust and also support the identification of risks and opportunities. Community spirit and caring for others benefit everyone—they bring companies closer to people, and people closer to companies.
ESRS reporting must be conducted digitally, meaning that companies are required to input their data into the EU’s digital reporting system, making the information accessible to as wide an audience as possible. While data is key, the ESRS framework contains a significant amount of descriptive, narrative information, with numerical data playing only a marginal role. However, this does not mean that data—both quantitative and qualitative—should not be collected; quite the opposite.
ESRS reporting represents an extensive framework, well-suited for large companies. For small and medium-sized enterprises (SMEs), however, it is burdensome and labor-intensive—especially when done for the first time. There are, however, glimmers of hope on the horizon: lighter, voluntary sustainability reporting standards are being developed specifically for SMEs. These simplified standards aim to better meet the expectations of SMEs and their stakeholders for more consistent and comparable sustainability reporting.
Not a second seems to have been spent on readability, plain language, or accessibility when drafting the ESRS standards.
And finally: no matter how much good, there's always a bit of bad. Not a second seems to have been spent on readability, plain language, or accessibility when drafting the ESRS standards. At worst, the text is extremely difficult to interpret—bureaucratic and legalistic to the point of resembling legal code. This is particularly puzzling given that equality is a core value also strongly emphasized by the European Commission. Even within this standard series itself, it is required that sustainability disclosures be presented in a “structured manner that facilitates accessibility and understanding” and that “sustainability information is understandable when it is clear and concise.” Unfortunately, the authors of the standards have not followed these principles, but instead have fallen back into the same old writing habits—without any sign of the kind of fresh thinking that the ESRS standards will soon demand from companies in their sustainability reporting.
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References
Euroopan komissio. (2022). Euroopan parlamentin ja neuvoston direktiivi (EU) 2022/2464 asetuksen (EU) N:o 537/2014, direktiivin 2004/109/EY, direktiivin 2006/43/EY ja direktiivin 2013/34/EU muuttamisesta yritysten kestävyysraportoinnin osalta.
Euroopan komissio. (2023). Komission delegoitu asetus C2023/5303 final. Liite asiakirjaan Komission delegoitu asetus Euroopan parlamentin ja neuvoston direktiivin 2013/34/EU täydentämisestä kestävyysraportointistandardien osalta.
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