MEPS have reaffirmed their commitment to the European Sustainability Reporting Standards (ESRS) after a vote in the European Parliament confirmed that mandatory sustainability reporting will now apply to 50,000 companies from January 2024 onwards.
According to the Global Reporting Initiative (GRI) and EFRAG, the body mandated to develop the ESRS, a high level of interoperability between the ESRS and the widely used GRI Standards has been achieved, with definitions, concepts and disclosures on impacts fully aligned wherever possible.
The ESRS is considered a central component of the Corporate Sustainability Reporting Directive (CSRD) and will apply to all large and listed companies in the EU. From 2028, non-EU companies operating in Europe must also report their impacts using the ESRS or equivalent standards.
“The endorsement of the ESRS by the European Parliament is welcome because it signals the transition from political debate to practical implementation for these new rules – which are a game changer for corporate accountability, in the EU and globally,” said Eelco van der Enden (pictured), CEO of GRI.
“We will continue to actively engage with EFRAG and other standards setters, at national and international levels, to further increase the momentum behind impact reporting, ensuring companies deliver the sustainability information their stakeholders require while reducing the reporting burden. This reflects our evolving role as a trusted partner for regulators, with GRI reporting underpinning high-quality and increasingly mandatory sustainability reporting.”
GRI said that it is currently finalising interoperability tools, including a digital taxonomy and multi-tagging system, to simplify the reporting process and support companies to report in accordance with both ESRS and the GRI Standards within a single sustainability report.
In July, concerns were raised over the potential that standards may be ‘reduced’ in order to ensure alignment between various sustainability reporting frameworks. A subsequent round of amendments led to a downgrading of some disclosures from mandatory to voluntary, the phasing in of some disclosures such as Scope 3, and the ability for companies to decide what is or isn’t material, with some sustainable investment commentators calling it a “compromise”.
Carol Adams, chair of the GRI Global Sustainability Standards Board (GSSB), said that the Initiative stands ready to deepen their engagement in the EU regulatory process.
“As we approach implementation of the ESRS, this work will be prioritised in the current GSSB work program. Furthermore, we will be working with EU institutions to reach agreement that reporting using GRI standards is accepted as equivalent for non-EU companies.”
The news has been welcomed in the sustainable finance industry, with Jurei Yada, programme lead for EU sustainable finance at climate change think tank E3G, saying that last minute calls to reject and water down the sustainability standards were “a shameful attempt to instrumentalise business and SMEs to justify inaction.”
“Amid international backlash to corporate sustainability reporting and a growing anti-ESG movement, Europe held the fort for sustainable businesses,” added Tsvetelina Kuzmanova, senior policy advisor in sustainable finance at E3G.
“Standardised, transparent, and comparable data will not just guide companies in their transition but also inform investors and consumers.”