A breakdown of the ESRSs and double materiality
We have been waiting for them, and now they are finally here.
The European Sustainability Reporting Standards (ESRSs) are the standards companies must follow when reporting and complying with the Corporate Sustainability Reporting Directive.
If you have no idea what we are talking about, continue reading and we will enlighten you.
There are three categories of ESRSs
The first category, the cross-cutting standards, consists of two ESRSs (ESRS 1 and ESRS 2).
They cover all the general requirements you must follow when you prepare and present any required sustainability-related information.
That includes the specific information companies must communicate about their material impacts, risks, and opportunities when it comes to ESG and sustainability.
And by material, we mean that they are of significance to the company.
The second category, the topical standards, consists of ten ESRSs based on ESG.
We have made an overview of them below:
According to these ten standards, you must specify
the company’s impact on the ESG dimensions,
the company's material risks and opportunities in this area, and
the impact that the dimensions have on the company’s ability to create value.
The last category, the sector-specific standards, have not yet been published.
Unlike the two former categories, this category will have specific standards for individual sectors.
Also, listed SMEs will have their own proportionate standards to follow when reporting – we are waiting for them too.
Double materiality as the basis for reporting
When reporting on sustainability, companies must do it based on the double materiality principle.
If you are unsure what exactly that means (or if you have no clue), let us explain.
Basically, double materiality means that you have to consider two sides when thinking about material (read: significant) matters.
Because yes, a company can have an impact on environmental and social conditions – but it also works the other way around.
Environmental and social conditions can influence an organization’s (financial) development, performance, and position.
So, it is important that companies perform a materiality assessment based on the double materiality principle in order to identify which impacts, risks, and opportunities to report.
And impacts include those related to both your company and your value chain.
When will it affect you?
That depends.
If you already had to follow the Non-Financial Reporting Directive (NFRD), then your first reporting year is 2024 with the first report in 2025.
If you are a large company with more than 250 employees, €40 million in turnover, and €20 million in total assets (or at least two of the three), your first reporting year is 2025 with the first report in 2026.
If you are a listed SME or any other undertaking (except for listed micro enterprises), your first reporting year is 2026 with the first report in 2027.
However, note that SMEs can opt-out until 2028.
If you have any questions, do not hesitate to reach out!