Laura Lopez Mingo

The European Sustainability Reporting Standards: a Phase-in Journey to Sustainability Alignment

Unlike its predecessor, the NFRD, which required companies to report separate sustainability reports, the CSRD requires companies to report the sustainability information of the undertaking in a clearly identifiable section of the management reports. This is a clear example of the European Commission’s progressive shift to a digitalised reporting framework to improve the accessibility of data and enhance the interplay of financial and sustainable information.

The first set of ESRS were submitted after its final editorial review by EFRAG to the European Commission on 23 November 2022. In total, the first set of 12 standards outlines the reporting requirements for the CSRD. The standards are divided into two “cross-cutting standards” and 10 “topical standards”. The cross-cutting standards are used to define the general requirements that apply to all the topics subject to the CSRD (more in our CSRD blog). The topical standards provide metrics for the environmental, social and governance aspects of the CSRD.


  1. ESRS 1 - General requirements
  2. ESRS 2 - General disclosures
  3. ESRS E1 - Climate Change
  4. ESRS E2 - Pollution
  5. ESRS E3 - Water and marine resources
  6. ESRS E4 - Biodiversity and ecosystems​​
  7. ESRS E5 - Resource use and circular economy
  8. ESRS S1 - Own workforce
  9. ESRS S2 - Workers in the value chain
  10. ESRS S3 - Affected communities
  11. ESRS S4 - Consumers and end-users
  12. ESRS G1 - Business conduct

The architecture of the CSRD foresees the publication of sector-specific standards to come later and standards for SMEs, both of which were not included in the public consultation last year.

The ESRS architecture path

On April 29, 2022, the initial exposure draft of the ESRS was published by EFRAG and opened a 100-day public consultation period. The initial exposure draft set reporting requirements for 13 standards. The consultation period received feedback from stakeholders who submitted 290 position papers and 702 responses.

The responses gave EFRAG guidance on the market’s common concerns. These included: the time and cost of collecting datavalue chain approachalignment with global standards and policies, criticism of the rebuttable presumption concept, not comprehensive definitions and assurance challenges. Following the feedback, the ESRS were updated to include a higher scope of the materiality assessment to get rid of the need to justify and explain the omission of specific information under the rebuttable presumption, a reduction in the number of disclosure requirements as well as phase in timeframes to reduce compliance costs, and the value chain also included a phase-in period and further clarifications focused on materiality.

The first set of ESRS architecture 

The architecture of the ESRS has been drafted to meet the disclosure requirements of the CSRD and follows a structure in the three ESG categories, with reporting topics and different disclosure layers and new components.

Reporting areas designed in the ESRS 2 on topical should cover:

  1. Governance processes, controls and procedures with which the company monitors and manages impacts, risks and opportunities
  2. Strategy and business model of the material, risks and opportunities
  3. Impact, risk and opportunity management, identification, processes, policies and actions
  4. Metrics and targets of the undertaking's performance

The disclosure layers of the ESRS are:

  1. Sector-agnostic
  2. Sector-specific - to be published
  3. Entity-specific - to be published

The CSRD requires the sustainability information to be checked externally for the first time. Consequently, entities in scope will need to seek limited assurance of the CSRD reporting. Having a limited assurance requirement adds to EFRAG’s aim to reduce the compliance burden on undertakings because it means that an auditor will perform fewer tests than if it had to carry out a reasonable assurance. Furthermore, it is expected that before 1 October 2026, the EU Commission will adopt assurance standards to the national standards and procedures.

As discussed in our CSRD essentials, the ESRS also has new components that companies need to report on: double materiality, the inclusion of prospective information, information about the upstream and downstream value chain, and the concept of sustainability due diligence. The latter is related to the Corporate Sustainability Due Diligence Directive (CSDDD) which is expected to be published in 2023.

Alignment with European rules

The CSRD has been designed to ensure it supplements the EU Taxonomy. According to the EU Taxonomy, companies falling within the scope of the existing NFRD are expected to report on the extent to which their activities are sustainable. The indicators for this requirement will be specified in a separate Commission Delegated Act, in alignment with SFDR and existing EU Taxonomy requirements.

Alignment with international rules

EFRAG is working with international bodies to align the ESRS with international standards to reduce the compliance burden of entities’ sustainability reporting. Some of these standards are Task-force Climate Financial Disclosure (TCFD), International Sustainability Standards Board (ISSB), the United Nations Guiding Principles on Business and Human Rights and Global Reporting Initiative. 

The CSRD for non-EU companies

As of 1 January 2028, non-EU companies with substantial activity in the EU market will also need to report their sustainability using the ESRS if they are in the scope of the CSRD.

The entities in scope will need to check the data reported externally with either a European auditor or an independent auditor from a third country. 

For some countries, there might be international alignment in the disclosure requirements. For instance, in the United States, the SEC is expected to adopt climate rules that could be considered equivalent to the ESRS.

Some EU-based subsidiaries may be exempted from the CSRD, in this case, the undertaking will still need to ensure it is disclosing:

  1. A consolidated management report of the parent company under its local law requirement
  2. Reference its exemption from the CSRD in its subsidiary’s management
  3. Facilitate access to the consolidated management report.

Disclosure stages of the ESRS

There are 4 stages where the CSRD will be phased in to substitute the NFRD:

  • 1 January 2025 - CSRD applied to companies, banks and insurance under NFRD have to report the first set of Sustainability Reporting standards for the financial year 2024.
  • 1 January 2026 - CSRD applied to other large companies not under the NFRD report on financial year 2025.
  • 1 January 2027 - CSRD applied to listed SMEs on public markets have to start reporting to a reporting standard for the financial year 2026.
    • With a possible “opt-out” during a transitional period, meaning that they will be exempted from the application of the directive until 2029.
  • 1 January 2029 - Non-EU companies, listed in EU markets with subsidiarity in the EU and working in the EU that have a turnover above the thresholds (>250 employees, turnover of at least €40M or a balance sheet total of at least €20M) will need to disclose their financial year 2028.

Greenomy is at the forefront of the discussion actively engaging with EFRAG and will implement the latest ESRS into its portals once the final ESRS are published in June this year. 

The Greenomy portal is simple, cost-effective, and efficient, and reduces the need to hire external ESG consultants. The solution offers direct access to EU Taxonomy and CSRD definitions, requirements, and thresholds throughout each step of the technical screening and reporting process. Plus, we have built-in resources & human expertise on our chat feature, meaning that any queries you may have can be resolved instantly. If you are in the scope of the CSRD and would like to ease your reporting by simplifying and optimising your disclosure process you can contact us here

Join us in making sustainable disclosure an opportunity for your company!