The European Commission (EC) has released a final consultation to gather feedback on the adoption of European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD).
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The ESRS will apply to all companies within the scope of CSRD. Some reporting entities within the scope of CSRD will have to apply ESRS for periods commencing 1 January 2024. Large and most listed entities operating in Europe as well as reporting entities incorporated outside the EU with listed securities on an EU-regulated market will be required to adopt the ESRS. The four-week period for providing comments on this consultation closes on 7 July 2023 which means entities will have to react quickly if they want to share any concerns with EC. 


The CSRD requires large companies and listed small and medium-sized companies (SMEs), as well as parent companies of large groups, to include in a dedicated section of their management report the information necessary to understand the reporting entity’s impacts on sustainability matters. These entities will also be expected to provide information necessary to help stakeholders to understand how sustainability matters affect the company’s development, performance and position. This information must be reported in accordance with ESRS.

The ESRS have been drafted by the European Financial Reporting Advisory Group (EFRAG) and will become part of European Law before 31 December 2023. This will be achieved through a Delegated Act that supports and is directly linked to the CSRD. This draft Delegated Act, together with the ESRS, is the ‘package’ that is out for consultation until 7 July 2023.

What is the package released for consultation?

The CSRD will require reporting entities to include dedicated disclosures on various environmental, social and governance matters. The EC has kept the package together as a suite of 12 ESRS standards and they set out the detailed disclosure requirements for reporting entities to make.

The package contains the EC’s draft Delegated Act which sets out two cross-cutting standards and ten other sustainability standards for the disclosure of environmental, social and governance information. Together they will become law in the EU from 1 January 2024. The package (sometimes called the first set of ESRS) also contains two appendices. Appendix 1 sets out the revised 12 ESRS and Appendix II provides as list of acronyms and a glossary of terms.

The 12 ESRS includes:

  • Two cross cutting Standards which apply to all sustainability matters
    • ESRS 1 – General Requirements
    • ESRS 2 – General Disclosures
  • Environmental Standards
    • ESRS E1 – Climate change
    • ESRS E2 – Pollution
    • ESRS E3 – Water and marine resources
    • ESRS E4 – Biodiversity and ecosystems
    • ESRS E5 – Resource use and circular economy
  • Social Standards
    • ESRS S1 – Own Workforce
    • ESRS S2 – Works in the value chain
    • ESRS S3 – Affected communities
    • ESRS S4 – Consumers and end-users
  • Governance Standards
    • ESRS G1 – Business Conduct

All the Standards were updated from an initial set of draft Standards that were issued by EFRAG in November 2022.

What has changed since EFRAG’s revised submission?

The EC carried out consultations on the draft ESRS Standards that were issued by EFRAG in November 2022. It has made the following notable changes to the draft standards issued by EFRAG:

All Standards, including all disclosure requirements and data points within each Standard, will be subject to materiality assessment by the reporting entity, except for the 'General Requirements' and 'General Disclosures' Standards; ESRS 1 and ESRS 2. This updated requirement is expected to significantly reduce the burden for reporting entities making disclosures under the CSRD. Previously EFRAG had also wanted the climate Standard (ESRS E1) to be mandatory for all reporting entities in scope. And for any reporting entities that have more than 250 employees some disclosure requirements relating to the undertaking’s own workforce, would have also been mandatory.

In addition to the phasing-in proposed by EFRAG, the EC has provided some additional phasing-in that will help reporting entities, particularly smaller entities that would be subject to sustainability reporting requirements for the first time. The additional phasing-in introduced by the EC is:

  • For reporting entities with less than 750 employees, they may omit:
    • For the first year of applying the standards, scope 3 GHG emissions data and the disclosure requirements specified in the standard on 'own workforce'. 
    • For the first two years of applying the standards, the disclosure requirements specified in the standards on biodiversity and on value-chain workers, affected communities, and consumers and end-users.
  • For all reporting entities in the first year of applying the standards, they may omit:
    • The anticipated financial effects related to non-climate environmental issues (pollution, water, biodiversity, and resource use).
    • Certain datapoints related to their own workforce (social protection, persons with disabilities, work-related ill-health, and work-life balance). These datapoints are included in ESRS S1 ‘Own Workforce’.

Voluntary disclosures
The EC has decided that many of the disclosures and datapoints that were mandatory in the first draft of the ESRS should now become voluntary. These include biodiversity transition plans (ESRS E4), certain indicators about “non-employees” in the undertaking’s own workforce (ESRS S1) and an explanation of why the undertaking may consider a particular sustainability topic not to be material.  

Further flexibilities in certain disclosures
The EC has also introduced some flexibility around the disclosure of mandatory datapoints. For example, they have given more flexibility in disclosing the financial effects arising from sustainability risks and on engagement with stakeholders, and also in selecting methodology that should be used for the materiality assessment process. Furthermore, the EC has modified some of the datapoints linked to the disclosure of corruption and bribery which has done more to protect whistleblowers from self-incrimination.

Coherence with EU legal framework
The EC has made technical modifications to ensure better alignment with other provisions in the Accounting Directive and with other relevant pieces of legislation, for example regarding the Pay Transparency Directive and the European Pollutant Release and Transfer Register. 

The EC and EFRAG have continued to engage closely with International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) to ensure a high degree of interoperability with ESRS, and further modifications to the draft ESRS have been made because of that engagement.

What will happen next?

  • The EC consultation opened on 9 June 2023 and will close on 7 July 2023.
  • The ESRS need to be passed as EU law using a Delegated Act by the EC. This is expected to be at the end of July, start of August 2023, but can be no later than the end of August 2023 in order for the ESRS to be effective from 1 January 2024.
  • The adoption is followed by a two-month (extendable to four months) scrutiny period by the European Parliament and the Council. If no objections are raised, ESRS will be effective from 1 January 2024. The Standards cannot be changed in this period if objections are raised, so the process for the first set of ESRS would need to start again.