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European Sustainability Reporting Standards

In November 2022, the leaves were falling from the trees to the rhythm of ESG. First, the European Parliament and then the Council of the European Union approved the draft Corporate Sustainability Reporting Directive. Then the European Financial Reporting Advisory Group submitted the first set of draft European Sustainability Reporting Standards to the European Commission.

We wrote about the basic aims of the CSRD in the article “New sustainability reporting,” discussing the changes foreseen for environmental, social and governance reporting in the near future. Now we will focus on one element of the new system for sustainability reporting, the European Sustainability Reporting Standards (ESRS).

Genesis and work on ESRS

The current Non-Financial Reporting Directive (NFRD), and consequently the Polish Accounting Act implementing it, provide that when preparing statements or reports on non-financial information, obligated entities may freely apply any standards—national, EU or international—or even their own rules.

Therefore, currently, companies have a wide range of choices. The most commonly used guidelines are those developed by the Global Reporting Initiative. Also, the Polish market has a complementary Non-Financial Information Standard (SIN), which was created as a grassroots initiative coordinated by the Reporting Standards Foundation and the Association of Stock Exchange Issuers. Additionally, there are a number of other responsible business frameworks which can be an inspiration for non-financial reporting, e.g. the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.

However, the lack of specific rules for non-financial reporting makes it difficult to compare the information published by companies, and obligated entities may not disclose all significant data. The European Commission’s establishment of the European Sustainability Reporting Standards is to be the answer.

The ESRS are foreseen in the CSRD as mandatory and common standards for sustainability reporting (according to the CSRD, “sustainability reporting” is intended to replace the current “non-financial reporting”). The standards are to specify what information should be reported and, where appropriate, also the structure of that information for publication.

The ESRS are to be adopted by the Commission, assisted by the European Financial Reporting Advisory Group (EFRAG). This non-profit, public-interest association functions as a centre of expert knowledge on corporate reporting, and has been tasked with preparing the ESRS.

From June 2021 to April 2022, EFRAG conducted work on the first set of drafts, which was put out for public consultation from 30 April to 8 August 2022. On 22 November 2022, after taking the comments into account, EFRAG submitted the final drafts of the 12 standards to the Commission.

Structure and content of the ESRS

The first set of draft ESRS sent to the European Commission includes two cross-cutting standards and 10 thematic standards relating to the three specific components of the ESG concept (topical standards).

Draft cross-cutting standards (names in line with EFRAG nomenclature):

  • ESRS 1 General requirements
  • ESRS 2 General disclosures

Draft topical standards:

  • Environment:
    • ESRS E1 Climate change
    • ESRS E2 Pollution
    • ESRS E3 Water and marine resources
    • ESRS E4 Biodiversity and ecosystems
    • ESRS E5 Resources and circular economy
  • Social issues:
    • ESRS S1 Own workforce
    • ESRS S2 Workers in the value chain
    • ESRS S3 Affected communities
    • ESRS S4 Customers and end-users
  • Corporate governance:
    • ESRS G1 Business conduct.

In principle, these standards will apply to all companies required to report under the CSRD. The standards are expected to be finally adopted by the Commission by 30 June 2023.

Further, EFRAG will work on sector-specific standards and standards for SMEs.

First of all, the sector standards will relate to sectors associated with high sustainability risks. They will indicate the information that obligated entities will have to report in connection to the sector in which they operate.

The standards for small and medium-sized enterprises will be applicable by SMEs listed on a regulated market of any of the member states, small and non-complex institutions, and captive insurance and reinsurance companies that opt for the possibility of limited sustainability reporting provided for in the CSRD.

Both sectoral standards and standards for SMEs are due to be adopted by the Commission by 30 June 2024.

Additionally, it is worth mentioning one more type of standards, which should also be adopted by the Commission by 30 June 2024, i.e. the sustainability reporting standards for third-country entities that will be subject to reporting under the CSRD.


The establishment of European Sustainability Reporting Standards is key to ensuring that the sustainability information published by companies can be as comparable as financial information. It is also important for introduction of digitalisation and attestation of ESG reporting and establishment of appropriate supervision.

The CSRD states that the ESRS are to guarantee the quality of ESG information, requiring that the information is relevant, understandable, verifiable, comparable and faithfully presented. Moreover, the standards should not impose a disproportionate administrative burden on companies.

It remains to be seen how these work out in practice. For some companies, the ESRS are to be applied for reporting from 1 January 2024.

Julia Dolna, M&A and Corporate practice, Wardyński & Partners