ESRS Update in November 2022
The ESRS, or European Sustainability Reporting Standard, will become the sustainability reporting framework used by companies that fall under the CSRD to report on their sustainability performance. We have already covered the first draft in spring. The EFRAG develops the ESRS and the “First Set of draft ESRS” is now available. This post looks at what has changed from the initial version and what is next for the European Sustainability Reporting Standard.
Update: A revised version of the European Sustainability Reporting Standards or ESRS has been released in June 2023. We have compiled this blogpost to share all the information and updates with you.
European Sustainability Reporting Standard (ESRS) – A brief introduction
With the introduction of the Corporate Sustainability Reporting Directive (CSRD) comes the need for uniform disclosure requirements. The European Sustainability Reporting Standard or ESRS will be the reporting framework for that. The EFRAG has published the “First Set of draft ESRS” after an extensive participation process, which we discuss in more detail in this post.
In a nutshell: What is new in the ESRS, what has changed and what remains the same?
Feedback on the first drafts, including from the extensive participation process, has led to significant revisions compared to the draft version from spring 2022.
What has changed in the scope of the European Sustainability Reporting Standard?
- The most significant differences are in the scope of the disclosure requirements: Compared to the first draft, the number of disclosure requirements has reduced from 136 to 84.
- That reflects on the total number of data points too. The total number of qualitative and quantitative data points has been reduced from 2,161 to “only” 1,144 in the now-published first set of draft ESRS.
- One of the original standards, the ED ESRS G1, has been dropped entirely because of the CSRD text released in June 2022.
Materiality – without rebuttable presumption
- The concept of “double materiality” continues to play a central role. However, the requirement of “rebuttable presumption” has been dropped, simplifying the implementation of materiality assessments and the presentation in sustainability reports.
- The implementation of the ESRS in context has been clarified and focussed on the materiality of the value chain information.
Deadlines and transition phases
- According to current information, there will be a transition phase of three years for value chain information, which also reflects the relevant provisions of the CSRD.
- The transition period has been extended for various disclosure requirements from one to three years to allow more time to comply.
So only good news?
Reduced scope of disclosure requirements, fewer data points to report on, more clarity on the value chain in the context of the CSRD and the elimination of the “rebuttable presumption” – all this is good news.
However, some disclosure requirements dropped will become part of future sector-specific standards (and thus the associated data points). In contrast, others have been dropped because the benefits in terms of insights are within the corresponding preparation costs.
Nevertheless, our original assessment of the ESRS remains: It is a complex reporting framework with quantitative and qualitative data points to report on and shouldn’t be understood in any way as a mere collection of numbers, and companies should not underestimate the resources needed to prepare the reporting with the ESRS under CSRD.
What is next?
The ESRS is still a draft. Now that the revised drafts are available, the European Commission will consult EU bodies and member states before the final standards are adopted as delegated acts in June 2023.
Our white paper on ESRS
Our whitepaper on ESRS is currently receiving an update. We will be happy to send you the updated version by email free of charge. Click here and provide us with your contact information. You will receive the update automatically as soon as the update is completed.