A short introduction to ESRS

What is the European Sustainability Reporting Standard ESRS?
The ESRS (European Sustainability Reporting Standard) is the newly released framework for pursuing transparency and accountability within the corporate sphere in Europe. It is the tool that affected companies must use to fulfill the requirements of the European Corporate Sustainability Reporting Directive. The goal of the ESRS framework is to establish a unified basis for reporting environmental, social, and governance (ESG) aspects, aiding investors, consumers, and other stakeholders in making informed decisions and pushing sustainability efforts within the companies forward.

Why should we use ESRS?

Various reporting standards exist, like the German Sustainability Code (DNK), the GRI Standards, and the SASB Standards, to name a few. This variety makes it difficult to compare companies’ sustainability efforts.
Using the ESRS guidelines, companies can measure, disclose, and compare their sustainability practices and performances similarly and thus contribute to more transparency in the whole economy. Even if your company is not obliged now through CSRD regulations to use ESRS, it is planned that year after year, more and more companies will be. So, using the ESRS Standards now, or starting to prepare for it, is a clever move to prepare for future requirements. Also, smaller, non-obligated companies will need to be more transparent with their sustainability strategies as part of the supply chains of obliged companies.

What does using the ESRS Standards require?

An essential facet of the ESRS lies in its adaptability across diverse industries and company scales. That ensures that businesses of all types can transparently present their sustainability endeavors.
The whole reporting process with ESRS is based on an extensive double materiality analysis to identify the company’s materiality topics.
The ESRS standard demands revealing much information, for example, the company’s total Greenhouse Gas Emissions measured in all three scopes. Overall, the whole value chain needs to be analyzed, and the focus should be on transparent supply chains.

The structure of the ESRS standards

The standard comprises two cross-cutting standards (ESRS 1 and ESRS 2) and ten topic-specific environmental, social, and governance standards. It is planned to add sector-specific standards as well.
The two overall standards, ESRS 1 (General Requirements) and ESRS 2 (General Disclosures), contain the general principles and disclosures that must be considered when preparing sustainability reports. ESRS 2 is mandatory for all companies reporting with ESRS.
As written above, the whole reporting process with ESRS is based on an extensive double materiality analysis to identify the company’s materiality topics. Depending on the outcome of that analysis, the business must additionally choose the appropriate theme standards for its reporting structure. That enables companies to focus on the most important topics of their business operations.

European Sustainability Reporting Standard
Conclusion

The introduction of the ESRS marks a significant stride for the European economy, fostering clearer communication of sustainability goals by companies and bolstering transparency and trust within the financial market. The EU is committed to placing sustainability at the core of its economy, and the ESRS serves as a tool to attain these objectives.
However, companies need help implementing these standards, sometimes requiring redesigning internal processes and systems. Nonetheless, the long-term impact of the ESRS is likely to be positive, as it encourages companies to focus more intensely on sustainable practices and provides investors and consumers with a comprehensive view of a company’s sustainability performance.

If you want to know more about the new ESRS standards or need help to implement ESRS reporting in your company, please get in touch; we are happy to support you.
You can download the ESRS overview image as a PDF below:

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