EU to ease sustainability reporting burden on firms

The European Commission has adopted a revised European sustainability reporting standard (ESRS) and a voluntary reporting standard for smaller companies.

The commission said the revised standards will reduce administrative burdens for European Union (EU) businesses while maintaining high-quality disclosures.

The changes are part of EU's Omnibus I simplification package, which streamlines sustainability reporting and reduces the number of companies in scope of the Corporate Sustainability Reporting Directive (CSRD).

The package aims to simplify EU rules and boost competitiveness and unlock additional investment capacity.

"The revised ESRS are shorter and clearer, add new flexibilities, and streamline key processes," the European Commission said.

"They reduce the number of mandatory datapoints by over 60% and the total number of datapoints by over 70%. These changes are expected to reduce reporting costs by more than 30% per company, in line with the commission's target of reducing burdens associated with reporting requirements by 25%."

The commission had taken feedback from stakeholders in May and said the targeted adjustments will help further ease the reporting burden without undermining the CSRD's policy objectives.

For smaller companies outside the scope of the CSRD, the commission said the voluntary reporting standard provides a single, proportionate reference framework for sustainability reporting companies.

"It will make it easier for companies not covered by the CSRD to respond to specific requests for sustainability information from large financial institutions and companies," it said.

"It also establishes a value chain cap, meaning that companies subject to the CSRD cannot require companies in their value chains to provide more information than what is covered by the voluntary standard."

The act revising the standard will now be transmitted to the European Parliament and the Council of the EU for scrutiny.

The commission said the measures will apply once the scrutiny period of two months, which can be prolonged by a further two months, is over.

ESRS cover environmental, social, and governance issues, including climate change, biodiversity and human rights. They provide information for investors and other stakeholders to understand the sustainability-related risks to which companies are exposed and their impacts on people and the environment.