ESRS? European Standards again

EcoVision
Dec 22, 2025
2 min read

What is ESRS?

ESRS stands for European Sustainability Reporting Standards.

They are the mandatory ESG reporting standards that companies must use under the EU’s Corporate Sustainability Reporting Directive (CSRD).

ESRS define what sustainability information companies must disclose, how, and with what level of rigor, covering environmental, social, and governance (ESG) topics.

Brief History of ESRS

1. Origins (2019–2022)

ESRS emerged from the European Green Deal and the EU’s push to channel capital toward sustainable activities.
In December 2022, the EU adopted the CSRD, legally mandating the creation of detailed sustainability reporting standards.

2. Development by EFRAG (2022–2023)

The European Financial Reporting Advisory Group (EFRAG) was tasked with drafting ESRS.
ESRS were designed to:
- Apply a double materiality approach (impact + financial risk/ opportunity).
- Be interoperable with GRI and ISSB/IFRS S2.

3. Formal Adoption (31 July 2023)

The European Commission adopted the first set of 12 ESRS via a Delegated Act:
- 2 cross‑cutting standards (ESRS 1 & 2)
- 10 topical standards (E, S, and G).

4. Phased Implementation & Delays (2024–2026)

Due to complexity and burden concerns:
- Sector‑specific ESRS and non‑EU company standards were delayed to 30 June 2026.
- “Wave 1” companies started reporting for FY 2024.
- “Wave 2 & 3” companies received timing relief (“stop‑the‑clock”).

5. Simplification Phase (2025–2027)

In response to market feedback, the EU launched an ESRS simplification initiative:
- Mandatory datapoints reduced by ~60%.
- Clarified double materiality and introduced proportionality mechanisms.
- A broader ESRS revision is expected to be finalized by FY 2027.

What Are the Corporate Implications?

1. ESG Reporting Becomes a Legal Obligation

ESRS are not voluntary.
Non‑compliance exposes companies to:
- Regulatory enforcement
- Audit findings
- Reputational risk
- Capital market penalties.

2. Double Materiality Is Mandatory

Companies must assess and disclose:

Impact materiality: how the company affects people and the environment
Financial materiality: how sustainability issues affect enterprise value

This requires new governance, data systems, and stakeholder engagement processes, not just reporting.

3. Audit‑Grade ESG Data Is Required

ESRS disclosures fall under limited (and later reasonable) assurance.
Companies must implement:
- Internal controls over ESG data
- Traceability and documentation
- Integration with financial reporting systems.

4. Value Chain Transparency

ESRS require disclosures across the entire value chain, including:
- Scope 3 emissions
- Human rights risks
- Supplier practices

This extends ESG obligations beyond the company’s own operations.

5. Strategic, Not Just Compliance Impact

In practice, ESRS force companies to:

Embed sustainability into strategy and risk management
Link ESG targets to capital allocation and executive incentives
Prepare for investor scrutiny and sustainable finance alignment

Early evidence shows ESRS is reshaping how companies define long‑term value creation, not just how they report it.

In One Sentence

ESRS transforms ESG from a voluntary narrative exercise into a regulated, audited, strategy‑shaping component of corporate reporting in Europe.

References & Learn more:

#ESG #Sustainability #CSRD #ESRS #SustainableFinance #CorporateReporting #ClimateRisk #ResponsibleBusiness #LongTermValue #ESGStrategy

ESRS? European Standards again

What is ESRS?