New EU Sustainability Reporting Standards Take Steps To Address Climate Change

By August 1, 2023 No Comments

Scientific studies indicate that the July heatwaves in Europe and the US were caused by human-induced climate change. It is therefore essential that every organisation takes every possible measure to reduce its environmental impact.
As such, it can be considered timely that the EU has an upcoming set of new Sustainability Reporting Standards (ESRS) which will be mandatory for companies under the CSRD to comply with from 2024.
The CSRD is the EU’s Corporate Sustainability Reporting Directive which obliges large companies to report on the social and environmental impacts of their activities. 50,000 companies will be covered by the legislation which is proposed to be applied for the 2024 financial year, first reporting due on 1st Jan 2025.

This new CSRD directive will apply to all large companies that meet at least 2 out of the following 3 requirements: 250+ employees, 40 million EUR net turnover, 20 million EUR in assets, as well as all listed companies on EU-regulated markets and SMEs listed on EU regulated markets from the financial year 2026. Even though SMEs are not yet required to comply with the CSRD, starting to comply now with ESG reporting is very attractive to potential investors.
Details that organisations will need to publish include environmental protection, social responsibility, sustainability risk and the company’s impact on society and the environment.

Wildfires across Europe are a result of climate change

The ESRS will be aligned to already existing European policies and international standards to avoid double reporting and will be divided into 3 categories:

1.) 1 standard on general principles
2.) 1 standard on cross-cutting disclosure requirements
3.) Specific disclosure requirements on 10 ESG topics (five on environmental topics, four on social topics, and one on governance)

The ESRS timeline is:

1st January 2024: Companies that are currently obliged to report under the EU’s Non-Financial Reporting Directive (NFRD), i.e large-listed companies with more than 500 employees, will be required to start reporting under the ESRSs for the financial year 2024 (i.e reports issued 2025).

1st January 2025: Large companies covered by the CSRD need to report under the ESRS from the financial year 2025 (i.e reports issued 2026).

1st January 2026: SMEs and other small and non-complex institutions must implement the CSRD and align to the ESRS from the financial year 2026. However, they will have the option to opt out of the reporting rules until 1st January 2028.

As well as these essential new EU reporting standards, the United Nations Sustainable Development Goals also continue to address climate change.

The United Nations Sustainable Development Goals (SDGs) and climate change are closely interconnected. The SDGs are 17 global goals adopted by all United Nations Member States in 2015 as part of the 2030 Agenda for Sustainable Development. They aim to address various social, economic, and environmental challenges, including climate change, to create a more sustainable and equitable world by 2030. Climate change is explicitly addressed in Goal 13 of the SDGs, but its impacts are intertwined with a number of the other goals as well, as described below:

    Goal 13: Climate Action: This goal specifically targets taking urgent action to combat climate change and its impacts. It calls for strengthening resilience and adaptive capacity to climate-related hazards and natural disasters.

    Goal 7: Affordable and Clean Energy: Transitioning to clean and sustainable energy sources is essential for reducing greenhouse gas emissions and mitigating climate change. This goal promotes the expansion of renewable energy and energy efficiency measures.

    Goal 9: Industry, Innovation, and Infrastructure: Climate change requires innovation and infrastructure improvements to develop and implement sustainable technologies and practices that reduce emissions and promote sustainable development.

Other goals are also focused directly and indirectly on climate change. The full list and specific details are available here.

Addressing climate change requires collective efforts from all countries and stakeholders. The SDGs provide a comprehensive framework that links social, economic, and environmental dimensions, acknowledging that sustainable development and climate action are interconnected and interdependent. By achieving the SDGs, countries can work towards mitigating and adapting to climate change while creating a more sustainable and equitable future for all.

Vassallo Associates can advise on all aspects of Environmental Management and Energy Management within your organisation. Contact us today for a no-obligation consultation.

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