It has been all over the news lately as the EFRAG within the EU has approved the final version of the ESRS (European Sustainability Reporting Standards). It has been in the making for years, reaching higher traction in the past months. The question is, how will this affect us if any at all? Is it one other law whose effects are limited to the paper onto which it’s written?
It’s not the case. Companies will be obliged to report more than mere financial performance, which gives little indication of key aspects related to ESG beyond traditional financial reporting. The European Commission clearly defines Corporate Sustainability Reporting Standards as listed hereunder:
environmental matters
social matters and treatment of employees
respect for human rights
anti-corruption and bribery
diversity on company boards (in terms of age, gender, educational and professional background)
As you may recall, the standard is not completely new, as there has been another one named Non-Financial Reporting Directive, which also tackles sustainability. However, with the new regulation, we can see a widening scope as with the new regulations, the companies expected to oblige to report will go up from 12k to 50k. The regulation will, in fact apply to:
Large public-interest companies with over 500 employees – starting off in 2024
Companies with over 25
0 employees or €40 million revenue - starting off in 2025
Listed SME – starting off in 2026
The next three years will finally start a new era where companies will be assessed not simply on their financial performance as we are currently limited. We will start looking at companies and their contribution to society, whether positive or negative. As consumers and business partners, we can then take better-informed decisions, deciding if we want to ch
oose the company with its kind of profile or maybe the other ones whose values are more aligned towards ours.