European Sustainability Reporting Standards

Definition

European Sustainability Reporting Standards is a set of detailed disclosure (reporting) requirements developed by the The European Financial Reporting Advisory Group (EFRAG) as mandated to by European Commission under the Corporate Sustainability Reporting Directive (CSRD) by the European Commission.

History

The first set of draft European Sustainability Reporting Standards (ESRS) have been delivered to the European Commission on 22nd November 2022. They are the result of a re-deliberation process conducted by the EFRAG Sustainability Reporting Board (SRB) reflecting the outcome of the public consultation that took place from end of April to August 8th 2022 on the 13 ESRS Exposure Drafts (ED's), developed by the EFRAG Project Task Force (PTF)

List of ESRS Standards

EFRAG has proposed in 2022 a first set of draft ESRS's as follows:

Relationship with Other EU Legislation

Regulation (EU) 2019/2088 (Sustainability related disclosures in the financial services sector or SFDR). All the SFDR Principal Adverse Impacts indicators have been incorporated in the relevant cross cutting (ESRS 2 General disclosures) or topical standards (draft ESRS E1/E5, S1/S4, G1).
Regulation (EU) 2020/852 (Sustainable Finance Taxonomy). The undertakings subject to the scope of the CSRD are also obliged to disclose information required by Article 8 of the Regulation (EU) 2020/852 (Taxonomy Regulation) in conjunction with the Commission Delegated Regulation (EU) 2021/2178.
Alignment with EU Climate Transition Benchmarks and EU Paris-aligned Benchmarks. In order to allow for the implementation of the obligations related to the EU Climate Transition Benchmarks, draft ESRS E1 Climate change has a specific Disclosure equirement (E1-1 Transition plan for climate change mitigation) that requires the undertaking shall disclose its plans to ensure that its business model and strategy are compatible with the transition to a sustainable economy, and with the limiting of global warming to 1.5°C in line with the Paris Agreement and with the objective of achieving climate neutrality by 2050 and where relevant, the exposure of the group to coal, oil and gas-related activities.
Capital requirements regulation (CRR). The prudential requirements for credit institutions and investment firms require undertakings that are under the CRR to disclose specific sustainability-related information about their lending and investment portfolios, as defined in the relevant implementing standards developed by EBA.
EU Commission Recommendation of 9 April 2013 on the use of common methods to measure and communicate the life cycle environmental performance of products and organisations
EU Emissions Trading Scheme (EU-ETS). This Directive establishes a scheme for greenhouse gas emission allowance trading within the Community in order to promote reductions of greenhouse gas emissions in a cost effective and economically efficient manner.
EMAS III. EMAS III (Voluntary participation by organisations in a community eco-management and audit scheme) is mainly addressed to improve the environmental protection and provide organizations, supervisory authorities and citizens (to the general public) with a tool through which it is possible to obtain information on the environmental performance of organizations.
EU Whistleblowing Directive. The Directive establishes a legal and institutional framework to protect persons who, in the context of their industrial relations, draw attention to violations or to threats to the public interest or make information on them public.

Relationship with Other Global standard-setting initiatives

Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Draft ESRS E1 Climate change covers all the disclosure recommended in the TCFD; as such, EU undertakings that comply with ESRS E1 are expected also to be able to claim compliance with the TCFD. Appendix IV reports a list of the relevant paragraphs and DRs in draft ESRS E1 that cover respectively the core contents of TCFD (Strategy, Risk Management, Metrics and targets).
GHG Protocol. Draft ESRS E1 has primarily based the calculation guidance of the GHG emissions (Disclosure requirement E1-6 and related AR37 to 48) on the GHG Protocol. When preparing the information for reporting GHG emissions, the undertaking shall consider the principles, requirements and guidance provided by the GHG Protocol Corporate Standard (version 2004).
Transparent Project and Natural Capital Protocol. ESRS E4 chose not to follow a natural-capitals themed approach, but to build the standard around the underlying ecological themes of ecosystems, ecosystem services and species. This makes an alignment with globally accepted framework agreements and concepts such as the Post- 2020 Global Biodiversity Framework or planetary boundaries conceptually and practically possible.
Recommendations of the Task Force for Nature Related Financial Disclosure (TNFD). ESRS E1 and ESRS E4 are structurally compliant with TNFD.
Global Reporting Initiative (GRI) Standards. Across all the standards definitions, concepts and disclosures have been built leveraging on the GRI Standards and are fully or, when full alignment was not possible due to the content of the CSRD mandate, closely aligned with GRI.

References

EFRAG Due process note - First set of draft ESRS, 2022
EFRAG Explanatory Notes and Annex indicating where in the ESRS the EU Regulation defined in article 1(7b) of CSRD has been incorporated.