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Jul 31, 2023

European Commission adopts sustainability reporting standards

Watershed ESG disclosure requirements to be phased in for more than 50,000 companies

The European Commission today adopted the European Sustainability Reporting Standards (ESRS) to be used by all companies subject to the Corporate Sustainability Reporting Directive.

The standards are designed to generate information that helps investors understand the sustainability impact of the companies in which they invest. They cover a range of ESG issues, including climate change, biodiversity and human rights.

Mairead McGuinness, European Commission
Mairead McGuinness, European Commission

The standards also take account of discussions with the International Sustainability Standards Board (ISSB) and the GRI in order to ensure interoperability between EU and global standards and to prevent unnecessary double reporting by companies.

The reporting requirements will be phased in over time for different companies. About 50,000 European companies are expected to be required to report under the standards, in addition to non-EU companies with a large branch in the bloc.

‘Right balance’

The adoption of the ESRS marks another step forward in the transition to a sustainable EU economy, according to the commission. Mairead McGuinness, commissioner for financial services, financial stability and capital markets union, describes them as ambitious and an important tool underpinning the EU’s sustainable finance agenda.

‘They strike the right balance between limiting the burden on reporting companies while at the same time enabling companies to show the efforts they are making to meet the green deal agenda and accordingly have access to sustainable finance,’ McGuinness says in a statement.

Richard Howitt, picture: International Standards of Accounting and Reporting
Richard Howitt, picture: International Standards of Accounting and Reporting

Richard Howitt, who proposed the EU’s first rules on sustainability reporting in the European Parliament and led global efforts for international voluntary sustainability reporting frameworks to merge, says in a separate statement: ‘The further moves in the announcement to ensure the new European standards will be more interoperable with the global approach of the [ISSB] will be broadly welcomed. This is the future for business sustainability. I expect many companies to begin the process of alignment across all the new standards, even before they are formally required to do so.’

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