Understanding the European Sustainability Reporting Standard

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The ESRS are detailed guidelines developed to standardise sustainability reporting across Europe. 

They are part of the CSRD, which replaces the Non-Financial Reporting Directive (NFRD). The CSRD introduces stricter and more detailed sustainability disclosure requirements, aiming to enhance transparency and accountability in corporate ESG practices.

The ESRS framework covers three key areas:

• Environmental (E): Climate change, pollution, biodiversity, and resource use.
• Social (S): Workers' conditions, human rights, and social impact.
• Governance (G): Business ethics, risk management, and anti-corruption measures.

These reporting standards require companies to assess both financial materiality (how sustainability issues affect their business) and impact materiality (how their business impacts the environment and society). This approach is known as the double materiality principle.

Although the UK is no longer part of the EU, UK businesses with operations in the EU or significant business activities with EU companies are still subject to the ESRS and CSRD requirements.

As of January 2024, large EU-based companies are required to start reporting under the CSRD, including compliance with ESRS. For UK businesses, this means:

• UK subsidiaries of EU companies must comply with the reporting standards.
• UK companies with EU branches or significant business in the EU may be required to submit sustainability reports.
• Supply chain requirements could push UK companies to provide sustainability data to their EU partners.

The CSRD applies to companies that meet two out of three criteria:

1. A turnover of over €40 million.
2. Total assets exceeding €20 million.
3. More than 250 employees.

If a UK company meets these criteria within its EU operations, it will need to comply with the ESRS reporting requirements.

The CSRD and ESRS are being phased in over several years. Here’s a breakdown of the implementation timeline:

Who Needs to Comply?

• 2024: Companies already under the NFRD (large public-interest entities).
• 2025: Large companies not previously covered by the NFRD.
• 2026: Listed SMEs (Small and Medium Enterprises).
• 2028: Simplified reporting for non-listed SMEs.

By 2028, the ESRS will impact a wide range of businesses, including smaller companies that have EU-based supply chains or partnerships. 

This phased approach ensures companies have time to adapt to the new reporting standards, but it also highlights the urgency of starting the compliance process now.

To comply with the ESRS, companies must:

1. Assess Materiality: Conduct a double materiality assessment to determine what ESG issues are relevant to their business.
2. Gather Data: Collect detailed sustainability data across their operations and value chains.
3. Report Digitally: Ensure that sustainability data is digitally tagged and machine-readable, as required by the European Single Access Point (ESAP).
4. Provide Transparent Disclosures: Submit comprehensive sustainability reports that align with ESRS guidelines.

Failure to comply with ESRS can result in fines, reputational damage, and loss of business opportunities within the EU market.

At iModus, we understand that navigating new sustainability regulations can be challenging. 

Our team of experts is here to help your business stay compliant with ESRS requirements and turn sustainability reporting into a valuable opportunity for growth.

Our Services Include:

• Materiality Assessments: We help you identify which ESG issues are most relevant to your business and stakeholders.
• Data Collection & Management: Our tools and expertise ensure you gather accurate, verifiable data across your operations.
• Sustainability Reporting: We assist in preparing ESRS-compliant reports, ensuring your disclosures meet EU standards.
• Digital Tagging & ESAP Compliance: We make sure your data is digitally tagged and ready for submission to the European Single Access Point.
• Supply Chain Engagement: We work with your suppliers to ensure they meet the necessary sustainability criteria.

With years of experience in energy and carbon consultancy, we have a deep understanding of the challenges businesses face in meeting sustainability targets. 

Our hands-on approach and tailored solutions mean we can support your business in achieving compliance while also driving energy and cost savings.

We have successfully worked with companies across various industries, helping them adapt to evolving sustainability regulations and achieve long-term benefits from their ESG initiatives.