What is the actual state of the European Sustainability Reporting Standard?
The European Financial Reporting Advisory Group (EFRAG)  was tasked with the development of the European Sustainability Reporting Standard (ESRS), which will be the reporting framework used by corporations to report on social and environmental risks they face and on how the activities impact people and the planet under the Corporate Sustainability Reporting Directive (CSRD) . We have covered past developments in earlier blog posts  – for example, how a reduced number of disclosure requirements will help reduce the reporting burden for companies .
On June 9th, a revised version of the European Sustainability Reporting Standard was published for public consultation (the feedback period is open from June 9th 2023, to July 7th 2023) on the homepage of the European Commission .
Initial observations on the revised ESRS
We share our initial observations on the revised European Sustainability Reporting Standard in this blog post.
Note: We will add more insights and in-depth analysis in the following days to this blog post, so bookmark this page and check for future updates.
The basics: From what we have seen so far, the ESRS will still be demanding – for companies that will have to report for the first time and those already disclosing sustainability performance reports regularly. Phase-ins for disclosures that are especially complex to handle have been implemented to lower the initial barrier to reporting. However, these are phase-ins, so companies will need to tackle those complex reporting topics sooner or later (see below for more information about phase-ins and disclosure requirements).
Double Materiality as the fulcrum for sustainability reporting: While the first draft of the ESRS implied “rebuttable assumption”, we have seen substantial changes to this notion with the previously released draft ESRS. However, the concept of “double materiality” is the core concept of the ESRS and is more important than ever since the disclosure requirements will be subject to a double materiality assessment conducted by the reporting company. There is an exception for the disclosures specified in the “general disclosures” standard, however.
The basic equation: If a topic is identified as material, the organisation will have to report on it and also on the disclosure requirements that stem from the “general disclosures” category. So the scope and amount of disclosures will vary depending on the results of a double materiality assessment.
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Phase-ins, mandatory and voluntary disclosures: As mentioned above, phase-ins for disclosures considered especially complex to handle have been implemented to give organisations more time to adapt to the disclosure requirements. Examples are scope 3 emissions, disclosures on the own workforce, biodiversity, value-chain, and consumers or end-customers.
Some of the disclosure requirements that EFRAG has proposed to be mandatory have been converted by the European Commission into voluntary data points. These include transition plans for biodiversity and other disclosure topics.
The European Commission has also introduced certain flexibilities for some mandatory data points. Amongst others they include the methodology to use for the materiality assessment process.
In some cases, the phase-ins may depend on additional factors, e.g. the number of employees.
In the next update of this blog post, we will provide an overview of the phase-ins mentioned in the revised European Sustainability Reporting Standard, take a closer look at the data points now considered voluntary, and also discuss data points that might be required in other regulations like the SFDR.
What will be next for the European Sustainability Reporting Standard?
Reporting under the CSRD will start in 2025 based on 2024 data. Companies that fall under the CSRD will need time to adjust to the demands or disclosure requirements of the ESRS.
The consultation period is open until July 7th 2023, and the first comments have already been published on the EC’s homepage.
Sources and further reading
 European Financial Reporting Advisory Group – EFRAG
 NordESG – CSRD Update November 2022
 NordESG – ESRS Update on Public Consultation September 2022
 NordESG – ESRS 1000 Datapoints Dropped – Relief for Preparers
 European Commission – European sustainability reporting standards – first set