The European Sustainability Reporting Standards (ESRS) have narrowly escaped being ostracized by the European Parliament after a majority vote decided against scrapping them.
A vote in parliament yesterday saw 359 votes against excluding the standards, with 261 in favor, causing the motion to be rejected.
The ESRS is a core part of the Corporate Sustainability Reporting Directive (CSRD) and, when adopted, will be applicable to large listed companies in the EU. It requires firms to disclose information on the risks and opportunities arising from social and environmental issues and on the impact of their activities on people and the environment.
This in turn is expected to help investors, civil society organizations, consumers and other stakeholders to evaluate the sustainability performance of companies.
The standards are due to come into force in 2024 with reporting requirements needed by 2025. But ESRS came under scrutiny earlier this year, being seen as yet another disclosure requirement for companies lacking overlap with other disclosure commitments.
In response, the European Commission agreed to downgrade some of the requirements from mandatory to voluntary to alleviate pressure on companies including a now ‘phased-in’ approach to reporting requirements on biodiversity and various social issues.
Sébastien Godinot, senior economist at the WWF’s European Policy Office, which works closely with companies on disclosure standards, says: ‘Members of the European Parliament have safeguarded the ESRS, a vital tool for improving transparency on companies’ sustainability performance.
‘By standing firm against this attempt to kill the standards, members of parliament have pushed back yet another indirect attack on the Green Deal, ensuring that European companies are not penalized in their critical transition toward a greener future. Backward-looking views against the green transition have once again been defeated.’