EFRAG, NFRD, CSRD, ESRS - The list of acronyms in the world of sustainability is endless. Stephanie is trying to make sense of what they all mean, as she tries to understand what her organisation needs to comply with. With recent acquisitions and mergers, the company must now report to the EU CSRD, following the ESRS standards. Being an EHS manager, Stephanie is not very familiar with these ideas and is trying to figure it all out.
Are you just as confused by Stephanie? Is this your first time submitting your sustainability reports to the EU CSRD? Well, you’re in the right place!
Keeping reading to get a better understanding of the ESRS vs. CSRD, including:
Both the EU Corporate Sustainable Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS) were only established a few years ago. Here’s how it all began:
The European Financial Reporting Advisory Group (EFRAG) initially put the Non-Financial Reporting Directive (NFRD) into effect in 2014. This was to help introduce a few companies in the European Union (EU) to a form of reporting which was not related to their financials, but rather their Environmental, Social and Governance (ESG) performance.
In 2023, the European Commission wanted to replace the NFRD to reach a wider scope of businesses and have organisations comply with more detailed requirements. Thus, the EFRAG created the EU CSRD, a new framework which covers an even wider scope of ESG factors like GHG accounting, double materiality, and more. The EU CSRD will soon apply to more than 55,000 companies in the European Economic Area (EEA).
The EU Commission had also requested the EFRAG to come up with new sustainability reporting standards in 2023; and so, the ESRS was born, drafted in June of 2023. The European Sustainability Reporting Standards include a broader range of ESG elements including climate change, biodiversity, diversity and inclusion, and labour practices.
The main intention of the ESRS is to help organisations avoid repetitive disclosures by aligning with other major reporting standards like the Task Force on Climate-related Financial Disclosures (TCFD) and Global Reporting Initiative (GRI). The ESRS will apply to public companies as well as large private organisations.
Now that you know more about the EU CSRD and ESRS, let’s dive into the differences between the two. Essentially, the ESRS offers organisations the specific framework and methods they should follow when reporting to the EU CSRD. In other words, following the ESRS will help companies comply with the EU CSRD, as they complement one another.
Think of it like applying for university. The ESRS represents all the university requirements you need to submit like testing scores, high school grades, and more, while the EU CSRD is the university you’re applying to which mandates these requirements to get accepted. The EU CSRD is the law that makes it mandatory for companies to submit their reports, while the ESRS is the framework companies follow to achieve compliance.
With this framework and law being so new, here are some of the dates you need to keep in mind to help you prepare for a successful submission.
|
Organisation type |
First financial year covered |
First filing year |
|
Large companies subject to NFRD |
2024 |
2025 |
|
Large companies not subject to NFRD |
2025 |
2026 |
|
SMEs |
2026 |
2027 |
|
NON-EU companies |
2028 |
2029 |
All companies that were previously reporting to the NFRD will now have to follow the ESRS for the financial year of 2024, to submit their reports by 2025. Large companies which were not following the NFRD, will have to follow the ESRS for the financial year of 2025, to first submit in 2026 to the EU CSRD.
Listed and non-listed small and medium sized enterprises in the EU will first submit their reports in 2027 for the 2026 financial year. Finally, companies that are not located in the European Union, but make more than €150 million of revenue a year in the EU and that have a branch in the European Union which makes over €40 million, will have to report in 2029.
Collecting all this information takes time and involves multiple teams, so give yourself ample time to gather everything and set the proper processes in place for a successful submission.
If you’re just beginning your sustainability reporting journey, like Stephanie, it may be good to start with your GHG emissions accounting. This is one of the aspects that is required and allows you to get a more accurate picture of your organisation’s Scope 1, 2, and 3 emissions.
Check out our new GHG Guide to get a better understanding of what GHG emissions are, how to calculate them, as well as some words of wisdom from one of our internal sustainability experts to keep in mind when preparing your report. Let’s get started!