EFRAG finalises first set of drafts of the new ESRS

The European Financial Reporting Advisory Group (EFRAG) has finalised the revision of the draft EU Sustainability Reporting Standards (ESRS) published in April 2022 and handed over the first set of revised draft standards to the EU Commission today.

The application of the future ESRS is foreseen in the EU Corporate Sustainability Reporting Directive (CSRD), whose formal adoption is expected shortly. From EFRAG's perspective, the draft sector-agnostic standards finalised today are to be applied for the first time by large companies as follows:

• for financial years beginning on or after 1 January 2024 by large publicly traded entities that have more than 500 employees at the same time (i.e. entities already subject to the Non-Financial Reporting Directive (NFRD));
• for financial years beginning on or after 1 January 2025 by other large companies (i.e. not currently subject to the Non-Financial Reporting Directive).

The draft standards cover environmental, social and governance topics and also address cross-cutting issues:

• for financial years beginning on or after 1 January 2024 by large publicly traded entities that have more than 500 employees at the same time (i.e. entities already subject to the Non-Financial Reporting Directive (NFRD));
• for financial years beginning on or after 1 January 2025 by other large companies (i.e. not currently subject to the Non-Financial Reporting Directive).

The draft standards cover environmental, social and governance topics and also address cross-cutting issues:

• Cross-Cutting-Standards
  • Draft ESRS 1 General requirements
  • Draft ESRS 2 General disclosures
• Environment
  • Draft ESRS E1 Climate change
  • Draft ESRS E2 Pollution
  • Draft ESRS E3 Water and marine resources
  • Draft ESRS E4 Biodiversity and ecosystems
  • Draft ESRS E5 Resource use and circular economy
• Social
  • Draft ESRS S1 Own workforce
  • Draft ESRS S2 Workers in the value chain
  • Draft ESRS S3 Affected communities
  • Draft ESRS S4 Consumers and end-users
• Governance
  • Draft ESRS G1 Business conduct

In the next step, the European Commission will now consult the EU bodies and the member states on the draft standards before adopting the final standards as delegated acts in June 2023.

Small and medium-sized publicly traded companies are required to prepare a sustainability report as of financial years beginning on or after 1 January 2026, with the option to voluntarily postpone the first application to 2028. EFRAG is developing a separate set of standards for this group of entities in the coming year.

The draft standards, a cover note with further information on significant changes and other documents are available on EFRAG's website here: Website EFRAG. EFRAG's press release can be downloaded here.