Why does sustainability matter now more than ever before?
The 2030 Agenda for Sustainable Development, embraced by all UN Member States in 2015, offers a common roadmap for global well-being, featuring 17 Sustainable Development Goals (SDGs) that demand collaborative action from all nations, developed and developing, to address poverty, improve health and education, reduce inequality, foster economic growth, combat climate change, and protect our environment.
The European Union aims to be global leader that strives to achieve climate neutrality by 2050, representing an economy where greenhouse gas emissions are balanced by removals or offset measures. This goal is central to the European Green Deal and aligns with the EU’s dedication to global climate action as outlined in the Paris Agreement.
Achieve Circularity, Attain Sustainability
In order to strive for sustainability, we need to change our way of thinking and transform our economy from a linear to a circular model. The circular economy isn’t just about recycling; it’s a comprehensive approach that focuses on preventing negative impacts from the very beginning of each product or service’s lifecycle.
Explaining ESG: What You Need to Know
ESG is a framework that assesses a company’s performance and impact in three areas: Environmental, Social, and Governance.
Environmental criteria consider a company’s efforts in climate change, pollution, water use, biodiversity and commitment to developing a circular economy. Social criteria focus on how a company manages relationships with its employees, workers in their supply chain, customers, communities, and other stakeholders. Governance criteria evaluate the company’s leadership, transparency, and ethical practices.
Environment
Climate change
Carbon footprint
Value Chain emissions (GHG)
Renewable energy
Impact on Biodiversity
Water and waste management
Circular economy approach
SOCIAL
Diversity, Equity and Inclusion (DEI)
Human rights
Labour standards
Health and safety
Supply Chain management
Local communities affected
Governance
BOARD diversity
Executive compensation
Bribery and corruption
Political contributions and lobbying
Transparency
Privacy and data protection
Mandatory Reporting: Everything You Need to Know
Why? According to which standards? When? Where? How about current reports?
CSRD: Extending reporting from Large to All, including SMEs
In January 2023, the European Union introduced the Corporate Sustainability Reporting Directive (CSRD), which complements the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy. Under the CSRD, the EU established the European Sustainability Reporting System (ESRS), outlining the criteria and relevant indicators that organizations must utilize to fulfill their commitments for Environmental, Social, and Governance (ESG) reporting.
ESRS: the latest most comprehensive standard
The European Sustainability Reporting System (ESRS) is a framework that outlines specific criteria and indicators for organizations to meet their Environmental, Social, and Governance (ESG) reporting obligations as mandated by the Corporate Sustainability Reporting Directive (CSRD) in the European Union.
CSRD Rollout: Who Needs to Comply and When?
Companies need to comply with ESRS reporting with the timeline:
Start reporting in 2024 (in the 2025 annual report): Previously regulated entities under NFRD, like large listed companies, banks, insurance undertakings and large non-EU listed companies with 500+ employees.
Start reporting in 2025 (in the 2026 annual report): All other large companies, including additional large non-EU listed companies.
Start reporting in 2026 (in the 2027 annual report): Listed SMEs, including non-EU listed SMEs. Listed SMEs can delayreporting for an extra two years.
Additionally, non-EU companies making over EUR 150 millionyearly in the EU, with an EU branch exceeding EUR 50 millionturnover or having a subsidiary that is a large company or a listed SME, must report sustainability impacts at the group level from 2028, (in the 2029 annual report).
Where?
Companies are required to submit all ESRS-related data in their annual or management reports to the European Securities and Markets Authority (ESMA) using the European Single Electronic Format (ESEF) digital format. This ensures that both financial and ESG information are disclosed simultaneously, treating them as one complete set rather than separate parts.
The specific additional documents, such as verification or evidence, that might be necessary for reporting are still uncertain. To comply with regulations, all sustainability information must be presented in XHTML format for consistency and simpler confirmation.
Current reports
The CSRD replaces and expands upon the previous NFRD. Therefore all companies previously reported under the NFRD will experience a transition in reporting requirements as the CSRD takes effect, introducing the ERSR as the updated standard.
Companies, that currently reporting according to GRI standards will comply also with ESRS as a part of the high level of interoperability.
“Alignment between the ESRS and GRI’s impact standards provides reassurance for companies that they can utilize their existing reporting to meet these incoming requirements.”
Main difference is Double Materiality assessment
Double materiality is a concept used to determine whether specific sustainability-related topic or information should be included in a company’s sustainability report.
It considers the impact on the both, company’s operations – financial materiality and the broader impact on society and the environment – impact materiality.
ESG Reporting Landscape
Understand the main International and European reporting standards and systems, easily.
Are you lost? Explanation of most important abbreviations in sustainability.
