Legal & Regulatory News

European Sustainability Reporting Standards enter into force

On 22 December 2023, the first set of the European Sustainability Reporting Standards (ESRS) was published in the Official Journal of the EU. The ESRS will be applicable in all Member States and will apply to companies that come under the Corporate Sustainability Reporting Directive (CSRD).

Organisations subject to the CSRD must submit annual sustainability reports that are electronically readable and easily accessible to investors and other stakeholders. The ESRS provide a mandatory, uniform reporting standard that promotes comparability between sustainability-related information disclosed under the CSRD.

On 17 October 2023, the EU Commission adopted a delegated directive (the Delegated Directive) which increased the thresholds on balance sheet total and net turnover relevant for determining whether companies are in scope of the CSRD by 25%. The Delegated Directive was published in the Official Journal of the EU on 21 December 2023 and entered into force on 24 December 2023. It will apply for financial years beginning on or after 1 January 2024.

The CSRD will enter into force in a phased approach: -

• From 1 January 2024 - for Large EU companies (over €50 million in net turnover) already subject to the Non-Financial Reporting Directive (NFRD), with reports due in 2025; and
• from 1 January 2025 - for large companies not presently subject to the NFRD, with reports due in 2026; and
• from 1 January 2026 - for listed small and medium-sized enterprises, with reports due in 2027. SMEs can opt-out until 2028.

There are 12 ESRS, with the standards taking a “double materiality” perspective, pushing companies to report on:

• impacts on people;
• impacts on the environment; and
• how social and environmental issues create financial risks and opportunities for the company.

Click here to read the ESRS.

Click here to read the Delegated Directive.