On 23 November 2022, EFRAG delivered, as technical advice, the first set of draft European Sustainability Reporting Standards ("ESRS") to the European Commission.  Once adopted by the Commission, the ESRS will be reported against by in-scope companies under the Corporate Sustainability Reporting Directive.

This first set of 12 draft ESRS is comprised of:

  • 2 cross-cutting standards covering:
    • general requirements (double materiality, value chains and how to prepare and present sustainability information)
    • general disclosures (governance, strategy, and impact, risk and opportunity management)
  • 10 topical standards covering:
    • environmental disclosures (climate change, pollution, water and marine resources, biodiversity and ecosystems, and resources and the circular economy)
    • social disclosures (own workforce, workers in the value chain, affected communities and customers and end-users)
    • governance disclosures (business conduct).

EFRAG confirmed that the draft ESRS take into consideration input from the public consultation earlier this year on exposure drafts of the ESRS. As a consequence, the draft ESRS take account of international reporting standards and other international instruments, including the standards proposed by the International Sustainability Reporting Standards Board ("ISSB"). The draft ESRS also provide for a simpler approach to the materiality assessment process and a significant reduction in the reporting burden compared to the exposure drafts, including a reduction in the number of disclosure requirements and the inclusion of phase-in periods for many disclosures. Reporting that requires obtaining data from value chain partners, will not be required for the first 3 years (during which time undertakings use in-house data to provide insights on their value chain), except when value chain data is needed to enable users to comply with the requirements of other pieces of EU legislation.

The European Commission will consult with EU bodies and member states before adopting the final ESRS by June 2023.

A second set of ESRS, which are to include sector-specific standards, are to be adopted by the European Commission by June 2024.  Specific reporting standards for SMEs are also due to be adopted by June 2024.