The Commission, just before the summer recess, adopted the first set of rules on sustainable reporting standards. The delegated act is based on a specific delegation of the law, so both the EP and the Council have the power of scrutiny and a two-month deadline for objections. Given that this rarely happens, the text submitted would be the final version, subject to publication in the Official Journal. The most interesting part of the act is Annex I, which enlists the standards, and Annex II with some glossary.
The standards will begin to be applied gradually, depending on the type of company, as of January 1st, 2024, for financial year 2023.
The rules are designed for undertakings to be carrying out their sustainability reporting in accordance with Articles 19a and 29a of Directive 2013/34/EU following the timetable set out in Article 5(2) of Directive (EU) 2022/2464.
One of the important modifications to the EFRAG recommendations [which were presented in November 2022] is that more data points became voluntary, providing some relief to some extent companies which do not want to share extensively, or which have no means to immediately collect certain data.
There is also a more flexible phase-in for companies with less than 750 employees regarding some standards such as GHG emissions reporting for the first year and other standards until the second year. All companies can omit information on financial effects related to non-climate environmental issues and some elements of their own workforce information in the first year.
Another relevant introduction is that the issues to be reported must be doubly relevant from the point of view of sustainability impact and from the point of view of financial risks and opportunities. The benefit is that this assessment is performed by the company itself, according to the guidance set out in Appendix E of Annex 1.
The standards were divided into three categories of information:
Cross-cutting standards (mandatory in all cases).
'General requirements' (ESRS 1)
'General disclosures' (ESRS 2).
Standards on Environmental, Social, and Governance matters (mandatory in all cases)
Are divided into thematic standards: Environmental is divided into 5 sub-standards such as climate change (ESRS E1), resource use, and circular economy (ESRS E5), among others.
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