European Commission Adopts European Sustainability Reporting Standards
Like the United States, other countries are developing sustainability reporting rules for their larger companies. On July 31st, 2023, the European Commission adopted the European Sustainability Reporting Standards (ESRS), which will guide the sustainability reporting of companies subject to the European Union’s (EU) Corporate Sustainability Reporting Directive (CSRD). The European Parliament will now have two months to submit objections and comments on the adopted regulations.
The standards cover a broad range of environmental, social and governance issue areas which include pollution, climate change, circular economy and human rights. The goal of the standards is to create a common set of criteria for businesses to communicate their sustainability-related impacts to investors, consumers and other stakeholders.
The ESRS will apply to the following classes of companies on the following schedule:
- Large EU-headquartered companies (more than 250 employees, net revenue of 40 million euros or total assets of 20 million euros) must report starting for financial year 2024.
- Most companies with listed securities on the EU’s regulated market that are not large companies must report starting for financial year 2026.
- Large subsidiaries of non-EU parent companies (net EU revenue over 150 million euros) must report starting for financial year 2028.
If the standards are published in the EU Official Journal as adopted by the European Commission, they are expected to take effect on January 1, 2024. For more information, please visit the EU ESRS FAQ page.