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EU Commission adopts European Sustainability Reporting Standards 

The European Commission has adopted the European Sustainability Reporting Standards (ESRS) for use by all companies, as part of the Corporate Sustainability Reporting Directive (31 July).

The European Sustainability Reporting Standards (ESRS) will be mandatory for use by companies that are obliged by the EU Accounting Directive to report certain sustainability information.

“The standards we have adopted today are ambitious and are an important tool underpinning the EU’s sustainable finance agenda. They strike the right balance between limiting the burden on reporting companies while at the same time enabling companies to show the efforts they are making to meet the Green Deal Agenda, and accordingly have access to sustainable finance,” said Mairead McGuinness, European Commissioner for Financial Services, Financial Stability and Capital Markets Union.

The standards cover a full range of environmental, social, and governance (ESG) issues and provide information for investors to understand the sustainability impact of the companies in which they invest. They also take account of discussions with the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI).

The reporting requirements will be phased in over time for different companies, the EU’s executive body said.

Impact on SMEs

The Accounting Directive, as amended by the Corporate Sustainability Reporting Directive, imposes no new reporting requirements on small and medium enterprises (SMEs), except for publicly listed SMEs.

For listed SMEs, the Accounting Directive provides for a “proportionate” reporting regime, the EU Commission said. However, they are not required to report sustainability information until the 2026 financial year, with the possibility of an additional two-year opt-out following this deadline.

Additionally, listed SMEs may report according to separate, proportionate standards that will be less demanding than the ESRS framework.

Some non-listed SMEs, which are not subject to any sustainability reporting requirements under the Accounting Directive, may nevertheless receive voluntary requests for sustainability information from customers, banks, investors or other stakeholders.

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