parallax background

European Sustainability Reporting Academy

Is your company grandchild-friendly?

The shortage of skilled workers continues to reach new highs. At the same time, regulatory requirements are increasing. This is especially true for sustainability and ESG issues. Companies are therefore increasingly relying on lateral hires to meet obligations and demands from banks, legislators, buyers and other stakeholders.

The European Sustainability Reporting Academy (ESRA) supports you with a customized training program. Within a year, prospective managers learn what is important in their job in the form of "training on the job". The training is completed with a certificate. ESRA is aimed at managers and specialists in companies, financial institutions, public institutions and auditing firms.


Give us 3 minutes for this explainer video?


Overview of the most important legal changes

Legal basis

Questions and answers on the updated EU reporting requirements

The EU Commission has revised the CSR reporting obligation. But what does that mean in detail? Who is affected? Why is the EU developing its own reporting standard for this? The sustainability portal UmweltDialog has compiled answers to these questions and many more.
1Why did the Non-Financial Information Disclosure (NFRD) Directive need to be revised?

With the NFRD, important principles for the annual sustainability reporting of large companies were laid down. The concept of "double materiality" was introduced, according to which companies not only have to disclose how sustainability aspects affect their company, but also how their company affects people and the environment. In the meantime, it has been shown that the information published by the companies is not sufficient. Reporting often lacks information that is important to investors and other stakeholders. The information between the companies is often hardly comparable, and users are often unsure whether they can rely on it. Quality problems in sustainability reporting can have repercussions. Investors are thus denied a reliable overview of the sustainability risks of companies. Investors need to know more and more about the social and environmental footprint of companies, also in order to fulfill their own obligations under the Regulation on Sustainability Disclosures in the Financial Services Sector (SFDR). In general, the green investment market can only be credible if investors are aware of the sustainability of the companies they invest in. Without this information it is not possible to channel money into environmentally friendly activities. Last but not least, reporting quality issues also result in accountability gaps. High-quality and reliable public reporting by companies will generally contribute to a stronger culture of accountability.

2Why should more companies be covered by the proposed sustainability reporting directive?

The NFRD introduced reporting requirements for so-called “public interest entities”, ie listed companies, banks and insurance companies. The rules apply to large companies (ie not SMEs within the meaning of the Accounting Directive) with more than 500 employees. The consultations carried out by the Commission showed that many stakeholders would like the reporting obligations to be extended to other categories of companies. Today's proposal expands the scope to include all large companies, regardless of stock exchange listing and without the previous threshold of 500 employees. This change would mean that in future all large companies would have to report to the public about their social and environmental footprint. This would also meet the demands of investors for appropriate sustainability information. In addition, the Commission proposes to extend the scope to listed SMEs and only exclude listed micro-enterprises. For reasons of investor protection, it is particularly important that investors have access to appropriate sustainability information from listed companies. In addition, if listed SMEs do not disclose sustainability data, they could risk being left out of investment portfolios. This danger is growing as sustainability information becomes more important throughout the financial system.

3What does the proposal mean for smaller companies?

The proposal does not introduce any new reporting requirements for small companies, except for SMEs whose securities are listed on a regulated market. In addition, to minimize the burden on listed SMEs, the standards for their reporting are simplified compared to larger companies. In addition, the reporting requirements envisaged in this proposal would not apply to SMEs listed on SME growth markets, nor to SMEs traded on multilateral trading facilities (MTFs). Meanwhile, many SMEs are increasingly being asked for sustainability data - mostly from banks that lend them money and from the large companies that supply them. The transition to a sustainable economy is likely to mean that collecting and sharing information on sustainability will become common practice for companies of all sizes. Therefore, in parallel with the new rules for large companies proposed today, the Commission is also proposing to develop their own proportionate standards for SMEs. SMEs listed on regulated markets could fulfill their statutory disclosure requirements under these simplified standards and unlisted SMEs could apply them on a voluntary basis. These standards would be tailored to the capabilities of SMEs and would make it easier for them to share information with banks, large corporate customers and other stakeholders. They can help SMEs play their full role in the transition to a sustainable economy. In addition, since smaller companies have been particularly hard hit economically by the Covid-19 pandemic, the requirements for listed SMEs would only take effect three years later than for larger companies.

4How and by whom should these new EU standards for sustainability reporting be developed?
The draft standards are to be prepared by the European Financial Reporting Advisory Group (EFRAG). EFRAG was set up in 2001 as a private not-for-profit association with the support of the Commission. A majority EU-funded public-private partnership, EFRAG was set up to advise the Commission on transposing international accounting standards into EU law. On behalf of the Commission, EFRAG has recently published technical recommendations and a roadmap for the development of EU sustainability reporting standards. At the same time, the Commission has asked the President of EFRAG for recommendations on possible changes to the organizational structure of EFRAG so that it can take on the task of preparing relevant draft standards. The recommendation is that EFRAG should develop the draft standards following due process and with expert input from stakeholders. Before adopting standards, the Commission will consult the Member State Expert Group on Sustainable Finance and seek the opinion of the European Securities and Markets Authority. The Commission will also consult the European Banking Authority, the European Insurance and Occupational Pensions Authority, the European Environment Agency, the European Union Agency for Fundamental Rights, the European Central Bank, the Committee of European Auditors and the Sustainable Development Platform finance. These consultations will help ensure a broad consensus on the content of the standards and consistency with relevant EU legislation and policies.
5How will EU reporting standards align with global standards, particularly the proposed IFRS Foundation standards?

The EU standards for sustainability reporting must be in line with the objectives of the European Green Deal and with the existing EU legal framework, ie the Regulation on Sustainability Disclosures and the Taxonomy Regulation. They not only have to cover the risks for companies, but also the social and ecological footprint of the companies (concept of "double materiality"). At the same time, the EU and European companies and investors clearly have an interest in the standards being coordinated globally. The aim should be that the EU standards contain all the essential elements of the globally recognized standards that are currently being developed. They should also go beyond where necessary to achieve the EU's own goals and to ensure coherence with the EU legal framework. The Commission supports the initiatives of the G20, the G7, the Financial Stability Board (FSB) and others to develop global baseline standards for sustainability reporting, building on the work of the Task Force on Climate-related Financial Information. The proposals of the IFRS Foundation to set up a new Sustainability Standards Board are just as relevant in this context as the work to date of established initiatives such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the International Integrated Reporting Council ( IIRC), the Climate Disclosure Standards Board (CDSB) and the CDP. The proposed EU standards for sustainability reporting would build on global standard-setting initiatives. This will require constructive two-way collaboration between EFRAG and relevant international initiatives. To lay the groundwork for such collaboration, EFRAG and the Commission have convened two meetings with the main international sustainability reporting initiatives in recent months.

6How does the CSRD relate to the other EU sustainable finance initiatives?
The CSRD would be aligned with the other EU initiatives for sustainable finance, notably the Regulation on Sustainability Disclosures in Financial Services (SFDR) and the Taxonomy Regulation. The aim is to reduce complexity and to avoid double reporting obligations as far as possible. This proposal would ensure that companies report the information that investors and other financial market participants subject to the SFDR actually need. In concrete terms, the reporting standards would therefore contain indicators that correspond to the indicators contained in the SFDR. Under Article 8 of the Taxonomy Regulation, companies that fall within the scope of the existing NFRD – and those companies that will additionally fall under the scope of the proposed CSRD if approved by the legislature – are required to provide information on the extent to which their activities are sustainable. The indicators for this will be defined separately in a Commission delegated act. Companies must report these indicators alongside the other sustainability data foreseen in the CSRD proposal. The reporting standards to be developed within the framework of the CSRD would take full account of these indicators and build on the taxonomy criteria of “significant contribution” and “avoidance of significant harm”.
7What does the proposal for auditing sustainability information entail?
The proposal would introduce a general EU-wide verification (confirmation) requirement for sustainability reporting for the first time. This will help ensure that the information reported is accurate and reliable. This should largely alleviate concerns from investors and other stakeholders about the reliability of the sustainability disclosures made by companies today. While the ultimate goal is for financial and sustainability reporting to provide a comparable level of assurance, a step-by-step approach is required. The Commission proposes to first require a "limited" confirmation. Compared to today, this would be a significant step forward without requiring “adequate” security (a higher, more far-reaching level of test security). Limited certification is more cost-effective for businesses and more in line with the current capacity and technical capability of the market for audit (certification) services. Since there are no standards for this yet, it is currently difficult to confirm sustainability reporting with sufficient certainty. The proposal therefore gives the Commission the possibility to adopt such standards. Should the Commission adopt standards for sustainability confirmation, the requirement of limited certainty would automatically become the legal requirement of reasonable certainty. The Commission proposal gives Member States the possibility to open up the market for services in the field of sustainability assurance to so-called "independent assurance providers". Member States could therefore use companies other than the usual auditors to confirm the quality of their sustainability information.
8Does the proposal provide for the information to be provided digitally?
The Commission proposal anticipates the increasing digitization of sustainability information. This can make reporting significantly cheaper for companies over time, while significantly improving the ability for investors and other stakeholders to compare and use the information. More specifically, the proposal would oblige companies to prepare their financial statements and management report in XHTML format in accordance with the ESEF regulation[1] and to tag their sustainability data according to a digital categorization system in accordance with said regulation. This digital categorization system would be developed alongside the sustainability reporting standards. The sustainability information could therefore easily be integrated into the "ESAP" (European Single Access Point) platform provided for in the action plan for the Capital Markets Union, for which the Commission will present a proposal later this year. The digitization of corporate sustainability reporting is also in line with the strategy for digitizing the financial sector, which aims to improve access to data and its further use in the financial sector.
9Does the proposal entail additional costs for companies?
The Commission's proposal aims to make reporting cheaper for companies in the medium to long term. Although the CSRD proposal would impose additional costs for those companies subject to the requirements in the short term, most companies will incur higher costs anyway as investors and other stakeholders increasingly request sustainability information from them. This problem is compounded by the fact that there are multiple standards and frameworks that overlap, and investors and other stakeholders often want different information. The Commission proposal offers an opportunity for an orderly, cost-effective solution to these demand-side problems, based on a consensus on the essential information that companies should disclose.
This website uses cookies to improve your experience. By using this website you agree to our Data Protection Policy.
Read more