August 8, 2023
The spotlight on ESG and sustainability within corporate operations is ever-increasing. Demonstrating its pioneering spirit, the European Commission has taken a significant step by proposing the Corporate Sustainability Reporting Directive (CSRD) to establish uniform sustainability reporting standards across the EU. This directive mandates companies to adopt a dual materiality approach and adhere to the European Sustainability Reporting Standards (ESRS).
The new regulation addresses the shortcomings of the NFRD, now increasing the scope of applicability to around 49,000 companies across Europe. ESRS requires companies to disclose information on business model and strategy, policies, risks, targets and due diligence with regard to ESG issues in their management report.
Companies previously subject to the Non-Financial Reporting Directive (NFRD) as well as large non-EU listed companies with more than 500 employees: financial year 2024, with first sustainability statement published in 2025.
Listed SMEs, including non-EU listed SMEs: financial year 2026, with first sustainability statements published in 2027. However, listed SMEs may decide to opt out of the reporting requirements for a further two years.
Non-EU companies that generate over EUR 150 million per year in the EU and that have in the EU either a branch with a turnover exceeding EUR 40 million or a subsidiary that is a large company or a listed SME will have to report on the sustainability impacts at the group level of that non-EU company as from financial year 2028. Separate standards will be adopted specifically for this case.
On 31 July 2023, the European Commission (EC) adopted the final delegated act of the (ESRS) presenting multiple changes from the version issued by European Financial Reporting Advisory Group (EFRAG) in November 2022. The standards have been designed in alignment to facilitate interoperability with other global reporting frameworks such as ISSB, GRI and TCFD among others. The 12 finalised sector-agnostic ESRS standards are enlisted below:
ESRS S1-Own workforce,
ESRS S2-workers in the value chain,
ESRS S3-affected communities,
ESRS S4-consumers and end-users
ESRS G1-business conduct
Indian companies with global operations or with subsidiaries/business operations in the EU or even those who are suppliers to large European companies must proactively align their reporting practices with these international standards to remain competitive, attract investments, and address evolving stakeholder expectations. Such companies can gain a competitive edge in the global marketplace.
At Breathe ESG, we understand the importance of sustainability reporting and the challenges that organizations face in meeting the reporting requirements. That is why we offer a comprehensive suite of ESG reporting solutions, to help organizations of all sizes and industries report on their sustainability performance in alignment with global reporting frameworks. Contact us today to learn more about our ESG reporting solutions and how we can help you enhance your sustainability performance and reputation. Together, we can create a more sustainable future for our planet and communities.
Explore how the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS) are shaping uniform reporting across the EU. Learn how companies, including those in India, can align for enhanced competitiveness. Breathe ESG offers ESG reporting solutions for streamlined compliance.