European Commission consults on draft delegated regulation with regard to ESRS

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09 Jun 2023

The European Commission has launched a consultation on a draft delegated regulation supplementing the European Accounting Directive as regards sustainability reporting standards.

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 European Commission is required to adopt the first set of sustainability reporting standards specifying the information that companies are to report in accordance with the CSRD. These draft European Sustainability Reporting Standards (ESRS) have been developed by EFRAG and were submitted to the European Commission in the form of technical advice. The European Commission has taken into account the technical advice provided by EFRAG. In addition, the European Commission has consulted various European agencies and other stakeholders subsequent to EFRAG submitting its technical advice in November 2022.

To ensure proportionality and to facilitate the correct application of the standards by undertakings, the European Commission has 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 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.

The draft regulation is open for feedback until 7 July 2023, which will be taken into account when finalising the regulation.

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