As noted in this Cooley Alert, the long-awaited drafts of the updated European Sustainability Reporting Standards (ESRS) were published and are now open for public consultation. The ESRS are the mandatory reporting standards for European Union (EU) companies subject to the EU Corporate Sustainability Reporting Directive (CSRD). These updates will impact many US companies if they are in scope of the CSRD via their EU subsidiaries.
Here’s an excerpt from the Cooley Alert:
“1. The topics have not changed.
The ESRS are still structured in the same way, with ESRS 1 and 2 covering general disclosures, five environmental standards (climate change, pollution, water, biodiversity and ecosystems, and resource use and circular economy), four social standards (own workforce, workers in the value chain, affected communities, and consumers and end users) and one governance standard (business conduct).
2. The structure of the ESRS has changed, with non-mandatory content moved to a separate document.
The idea behind this move is to cut down on the confusion that was created by mixing mandatory and non-mandatory requirements within the same standard. In this updated draft, topical standards now only contain mandatory disclosure requirements and application requirements (which is guidance on each mandatory disclosure requirement). Non-mandatory content has been moved to the Non-Mandatory Illustrative Guidance (NMIG).
3. Data points have been reduced by 68% compared to the previous version of the ESRS, according to EFRAG.
Most of the voluntary (“may”) data points have been deleted, with the possibility to maintain only a few of them for certain disclosures on an exceptional basis. Around one-third of the voluntary data points have been moved to the NMIG.
The mandatory data points that EFRAG considered to be the least relevant have been deleted. The mandatory data points are those that are required to be reported if they are material. According to EFRAG, these have been reduced by 57%. Most of the deletions are concentrated in the topical reporting standards, and while the deletions reduce the level of detail required, in many instances the information will still need to be reported under ESRS 2 (now referred to as general disclosure requirements) if the topic is considered material.”
Authored by
Broc Romanek