European Sustainability Reporting Standards: Balancing Progress and Challenges for a Sustainable Future

The adoption of the European Sustainability Reporting Standards (ESRS) by the European Commission marks a significant step towards promoting sustainable practices, although it presents a mixture of progress and challenges.

These standards, intended for use by companies under the Corporate Sustainability Reporting Directive (CSRD), introduce comprehensive impact reporting, linking impacts to business models, and value chain reporting as positive advancements. However, shortcomings include flexibility in materiality assessments, limited disclosure obligations, potential greenwashing through voluntary disclosures, and unnecessary delays for smaller companies in implementation.

Strengthening the ESRS requires forthcoming implementation guidance to ensure transparency and reliability in sustainability reporting, ultimately empowering stakeholders for informed decision-making.

The anticipated timeline involves ESRS becoming law by late 2023, with large companies subject to the Non-Financial Reporting Directive required to comply with CSRD starting January 2024.