European Commission finally approves the European Sustainability Reporting Standards (ESRS)

On July 31, 2023, the European Commission (EC) adopted the final delegated act of the European Sustainability Reporting Standards (ESRS). The Act includes 12 standards that are applicable from 1 January 2024. The EC made a set of changes to the draft standards proposed by European Financial Reporting Advisory Group (EFRAG) in November 2022. The EC’s changes fall into three main categories (as specified by the EC itself):

Phasing-in certain reporting requirements: The EC included some additional phase-in provisions for certain reporting requirements (on biodiversity and some social issues) applicable to companies with less than 750 employees to give them more time to prepare.

Giving companies more flexibility to decide exactly what information is relevant/material in their circumstances: The EC has also made more reporting requirements “subject to materiality”, allowing companies to omit information they find irrelevant.

Making some of the proposed requirements voluntary: The EC made several reporting requirements voluntary instead of mandatory, such as reporting a biodiversity transition plan.