The EU Accounting Directive (as amended by the Corporate Sustainability Reporting Directive (CSRD)) requires large companies and listed small and medium-sized companies, as well as parent companies of large groups, to include in a dedicated section of their management report the information necessary to understand the entity’s impacts on sustainability matters, and the information necessary to understand how sustainability matters affect the company’s development, performance and position.

The Commission was required to adopt the first set of sustainability reporting standards specifying the information that companies are to report in accordance with the CSRD. EFRAG developed draft European Sustainability Reporting Standards (ESRS) and submitted them to the Commission in November 2022 in the form of technical advice. The Commission considered these and feedback from various European agencies and other stakeholders and launched a consultation on a draft delegated regulation supplementing the European Accounting Directive as regards sustainability reporting standards in June 2023.

To ensure proportionality and to facilitate the correct application of the standards by undertakings, the Commission introduced modifications to EFRAG’s technical advice with regard to the materiality approach, the phasing-in of certain requirements, the conversion of certain requirements into voluntary datapoints, the introduction of flexibilities in a number of disclosure requirements, the introduction of technical modifications to ensure coherence with the EU’s legal framework and enhance interoperability with global standard-setting initiatives, as well as editorial modifications.

The Commission has now adopted its final delegated act. The ESRS to be used by entities for their sustainability reporting are set out in Annex I and Annex II of the draft regulation.

The regulation would enter into force four months after the date of adoption. The regulation, and therefore the ESRS, would apply from 1 January 2024 for financial years beginning on or after 1 January 2024. The regulation would be binding in its entirety and directly applicable in all member states.

Please click for access to the adopted final delegated act and its annexes through this European Commission website (scroll down to "Commission adoption") - this page also offers access to translations of the texts into the other official European languages. A question and answer document on the ESRS is also available.

In statement on its website, IOSCO has welcomed the publication of the ESRS "and, in particular, the announcement by the European Commission that it has integrated the ISSB Standards into them."

The IFRS Foundation has also published a statement commenting especially on interoperability. It notes:

The European Commission, EFRAG and the ISSB have worked jointly to improve the interoperability of their respective climate-related disclosure requirements in the overlapping climate disclosure standards.  This work has successfully led to a very high degree of alignment, reduced complexity and duplication for entities wishing to apply both the ISSB Standards and ESRS.

EFRAG is alsready working on an IFRS-ESRS mapping table that is available in draft version on the EFRAG website.

The ESRS delegated act adopted by the Commission today will be formally transmitted in the second half of August to the European Parliament and to the Council for scrutiny. The scrutiny period runs for two months, extendable by a further two months. The European Parliament or the Council may reject the delegated act, but they may not amend it.

For more information, see Deloitte's Need to know newsletter.