"Draft EU Sustainability Reporting Standards - Overview and Frequently Asked Questions", 9. December 2022

Following the legal mandate provided by the EU Corporate Sustainability Reporting Directive (CSRD), the EU must develop and adopt standards covering all sustainability areas, in line with the broader EU policy framework, including sustainable finance legislation, EU Climate Law and the bloc’s objectives and commitments on climate, nature and human rights.

The draft EU Sustainability Reporting Standards (ESRS) have been developed in an extensive and transparent multistakeholder process, and were approved without a dissent by EFRAG’s Sustainability Reporting Board, which includes representatives of Accounting Standards Committee of Germany, the Autorité des Normes comptables of France, the Dutch Accounting Standards Board, Organismo Italiano di Contabilità (OIC), as well as European stakeholders including Accountancy Europe, Business Europe, European Issuers, EFAMA, European Banking Federation, and representatives of civil society and of the European Trade Union Confederation, among others. The draft ESRS were submitted to the EU Commission in November for its final adoption via Delegated Act in the first half of 2023.

The ESRS are urgently needed to tackle major gaps1 on the quality, consistency and comparability of corporate disclosures and provide a full picture of companies’ management of their risks and impacts on people and planet. The implementation of these standards is key to achieve a timely and orderly transition to a sustainable economy and prevent systemic risks arising from late transformation2 . Without adequate sustainability information from companies, public and private investment will continue to be misallocated, seriously undermining the ability of the EU economy to meet the objectives of the European Green Deal and the UN Sustainable Development Goals. [...]

This briefing addresses the most common questions or concerns with direct responses, based on evidence and expert background information including:

1. How are the ESRS balancing the improvement of corporate ESG disclosures without entering into excessive prescriptive practices?

2. What are the challenges and how do the ESRS help businesses overcome them?

3. What about expected costs vs benefits? Will companies lose or increase competitiveness?

4. Will the ESRS for large companies end up affecting SMEs in their value chain (trickle down effect)?

5. Are the ESRS aligned with international developments and leading standards including ISSB proposals, TCFD or GRI?

6. How can the ESRS tackle greenwashing (specifically on climate)?

7. Do companies have enough time to adapt to the new rules?

8. Are companies at risk of reporting confidential or commercially sensitive information? What about increased liability?

Lastly, please find an overview of disclosure requirements proposed in the draft ESRS in the Annex. [...]