EU eases sustainability reporting rules 

June 20, 2023

The European Commission has introduced a series of proposed changes aimed at easing the burden on companies falling under the newly-widened remit of the European Sustainability Reporting Standards (ESRS). 

The proposals seek to reduce the reporting burden on small companies and first-time reporters by extending the phase-in times for some key sustainability factors. 

Smaller companies, which are classified as entities with fewer than 750 employees, will now have to disclose Scope 3 greenhouse gas emissions data in the first year. 

They will also be required to disclose impacts on biodiversity, value-chain workers, affected communities, consumers, and end-uses within the first two years.  

However, these proposals allow an extra year for companies to disclose information on expected financial effects related to non-climate environmental issues and on “own workforce” datapoints.  

These ‘own workforce’ datapoints relate to topics such as employee disability, work-related health conditions, and work-life balance. 

The amendments will also convert several datapoints, including biodiversity transition plans and indicators related to non-employees in the firm’s workforce, from mandatory to voluntary. 

Firms have also been granted additional flexibilities in the disclosure requirements related to the financial effects arising from sustainability risks and engagement with stakeholders.  

The commission’s proposals were released as a draft Delegated Act and amendments are open for consultation until July 7, 2023.  

The ESRS set the rules for companies to report on sustainability-related impacts, opportunities, and risks under the EU’s upcoming Corporate Sustainable Reporting Directive (CSDDD). 

The ESRS will also expand the number of companies required to provide sustainability disclosures from 12,000 to over 50,000 

The CSDDD secured approval from the European Parliament earlier this month and is due to come into effect from the beginning of 2024.  

The move comes as the European Commission introduced new rules to standardise ESG rules and prevent conflicts of interest to avoid greenwashing.