On 31 July 2023, the European Commission adopted the European Sustainability Reporting Standards (“ESRS“). EU and non-EU entities subject to the new EU Corporate Sustainability Reporting Directive (“CSRD“) will be required to report against the ESRS, making the development of interest to entities preparing for reporting under the CSRD regime.


The CSRD, which entered into force on 5 January 2023, creates detailed sustainability reporting requirements and expands the number of EU and non-EU companies subject to the EU sustainability reporting framework. The ESRS provide the basis for implementation of the sustainability disclosures required under the CSRD. The requirement for entities subject to the CSRD to report against the ESRS will be phased-in over time, with the first reports due from certain entities in 2025. Whether, and when, an entity falls in scope of the CSRD can be a complex analysis – for more information on the CSRD and how it may apply to both EU and non-EU entities, read our legal update here.

As discussed in our previous blog posts (which you can read here and here), the draft ESRS were initially published by the European Financial Reporting Advisory Group (“EFRAG“) on 29 April 2022 and made available for public consultation until 8 August 2022. Following the public consultation, EFRAG amended the draft ESRS and submitted the amended draft to the European Commission on 16 November 2022. The European Commission then consulted with other EU bodies, including the European Environment Agency and the European Central Bank, and subsequently issued amended draft ESRS for feedback on 9 June 2023. Following the closure of the window for feedback on 7 July 2023, the European Commission has now adopted the final ESRS by way of a delegated regulation.

Overview of the disclosure requirement

The ESRS include 12 standards: two cross-cutting standards (ESRS 1 and ESRS 2) that provide general reporting concepts (including double materiality and reporting boundaries) and overarching disclosure requirements; and ten topical standards with specific disclosure requirements for ESG matters.

The 12 standards are as follows:

Cross-cuttingESRS 1General Requirements
Cross-cuttingESRS 2General Disclosures
EnvironmentESRS E1Climate
EnvironmentESRS E2Pollution
EnvironmentESRS E3Water and marine resources
EnvironmentESRS E4Biodiversity and ecosystems
EnvironmentESRS E5Resource use and circular economy
SocialESRS S1Own workforce
SocialESRS S2Workers in the value chain
SocialESRS S3Affected communities
SocialESRS S4Consumers and end users
GovernanceESRS G1Business conduct

For a more detailed breakdown of the disclosure requirements under the ESRS, read our earlier blog posts here and here.

Main changes to the ESRS

The European Commission has made a number of changes to the draft ESRS submitted to it by EFRAG in November 2022, including:

  1. making more of the reporting requirements “subject to materiality” (i.e. allowing companies to omit information if it is not relevant in their particular circumstances). This has drawn criticism from some quarters as a dilution of the standards, whilst the European Commission have stated that the change was made to provide additional flexibility for reporting entities and to avoid unnecessary costs. Ultimately, the European Commission decided that all of the reporting requirements should be subject to materiality, with the exception of ESRS 2;
  2. adding a requirement where reporting entities conclude that a data point derived from compliance with disclosure obligations under other EU law (e.g. the SFDR) is not material, they must explicitly state that the data point is “not material”. In addition, the ESRS will require the disclosure a table with all data points derived from other EU law, indicating where such data points are located in the reporting entities’ sustainability statements (or stating “not material”, as appropriate).;
  3. updating the terminology associated with financial materiality to better align it with the definition of financial materiality in the ISSB Sustainability Disclosure Standards (for further information on the ISSB, read our earlier update here);
  4. changing disclosure requirements and data points in relation to certain topics from mandatory to voluntary, including biodiversity transition plans and certain indicators on “non-employees” in the entities’ workforce; and
  5. introducing additional phase-in provisions for some of the reporting requirements (including on biodiversity), which mainly apply to entities with less than 750 employees.

What next?

The delegated regulation will now be reviewed by the European Parliament and the Council of the EU. If neither of these bodies reject the delegated regulation, it will take effect from 1 January 2024.

In terms of international interoperability, the European Commission, EFRAG and the ISSB are due to release interoperability guidance material, which will be designed to help reporting entities understand the different disclosures required by the ESRS and the ISSB Sustainability Disclosure Standards. ERFRAG is also expected to publish additional guidance to support the interpretation and application of the final ESRS in due course.