European Sustainability Reporting Standards Framework (ESRS) for Corporate Sustainability Reporting Directive (CSRD)
Summary
As part of the Corporate Sustainability Reporting Directive (CSRD), companies will have to report under the new European Sustainability Reporting Standards (ESRS). Developed by the EFRAG and published in May 2024, ESRS objective is to provide investors with information to understand the sustainability impact of their investee companies. Drawing upon from other regulations like SFDR and Pillar 3 as well as other voluntary frameworks like the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) intends to ensure a very high degree of interoperability between EU and global standards and to prevent unnecessary double reporting by companies.
More information on the standards and the broader CSRD legislation, when reports are due and the IBM Envizi solution can be found on the IBM website.
Who should report?
Type of entities | Required entities |
|---|---|
Large undertakings | These include any listed or non-listed companies that meet two of the following three criteria on any two consecutive balance sheet dates:
|
SMEs | These include any companies listed on an EU-regulated market exchange—except for listed ‘micro undertakings’ that fail to meet two of the following three criteria on consecutive balance sheet dates:
|
“Third Country” undertakings | These include non-EU parent companies, with annual EU revenues of at least EUR 150 million in the most recent two years, and also own:
|
What are organizations required to disclose?
ESRS covers a comprehensive range of environmental, social, and governance (ESG) issues, including climate change, biodiversity, and human rights. The framework consists of over 160 disclosure requirements organized into eleven sections, which are grouped into different categories:
Cross-cutting Standards
Topical Standards
General Requirements: ESRS 1
General Disclosures: ESRS 2
Environment: E1, E2, E3, E4 and E5
Social: S1, S2, S3, S4 and S5
Governance: G1
Both sets of Cross-cutting and Topical Standards are sector-agnostic, which means they are applicable to all entities regardless of the industry in which they operate.
However, while the Cross-cutting standards are mandatory for all undertakings, for the Topical Standards organizations may chose to disclose only the information deemed as relevant to their specific business and operations. In this sense, entities are not required to report on topics deemed non-material to their business.
To learn more about ESRS materiality you can refer to the knowledgebase article
Solutions
IBM Envizi’s implementation of this ESG Framework contains tools to handle both quantitative and qualitative responses. The solution includes:
SRM Framework that covers all quantitative and qualitative data points in the EFRAG IG 3 List of ESRS Data Points, along with the ESRS legal text covering ESRS Standards (General Disclosures ESRS 2 and all sector-agnostic topical standards E1, E2, E3, E4, E5, S1, S2, S3, S4 and G1).
For more information on Envizi’s ESRS managed SRM Framework you can refer to the corresponding knowledgebase article
A collection of account styles that match all numeric data types in the EFRAG IG 3 List of ESRS Data Points.
Support in PowerReport to expose quantitative data captured in account styles. Upcoming release.
For more information on Envizi’s ESRS account styles you can refer to the knowledgebase article
ESRS managed framework may be updated to reflect new practices and implementation updates
This framework is a non-authoritative interpretation of the ESRS regulation and is based both on the ESRS and EFRAG list of datapoints. As such, the content of this framework may be periodically updated to better align with practices in sustainability reporting and to incorporate any new updates on the implementation of ESRS.