European Sustainability Reporting Standards

The European Sustainability Reporting Standards (ESRS) are a set of mandatory disclosure standards adopted by the European Commission to operationalise the Corporate Sustainability Reporting Directive (CSRD, Directive (EU) 2022/2464). They specify what sustainability information in-scope companies must publish, in what format, and against what methodology, with the goal of making non-financial data as comparable and auditable as financial statements.

The first set of twelve cross-sectoral standards was adopted by the Commission as a Delegated Regulation in July 2023. They are organised into:

• Two cross-cutting standards (ESRS 1 on general requirements and ESRS 2 on general disclosures).
• Five environmental standards (E1 Climate change, E2 Pollution, E3 Water and marine resources, E4 Biodiversity and ecosystems, E5 Resource use and circular economy).
• Four social standards (S1 Own workforce, S2 Workers in the value chain, S3 Affected communities, S4 Consumers and end-users).
• One governance standard (G1 Business conduct).

A defining feature is double materiality: companies must report both how sustainability issues affect their financial performance (financial materiality) and how their operations affect people and the environment (impact materiality). ESRS E1, for instance, requires disclosure of Scope 1, 2 and 3 greenhouse gas emissions, transition plans aligned with the 1.5°C goal of the Paris Agreement, and use of internal carbon pricing.

The standards were drafted by EFRAG (the European Financial Reporting Advisory Group) as technical adviser to the Commission and are intended to be interoperable with the ISSB's IFRS S1 and S2 standards and the GRI framework. Application is phased: the largest public-interest entities began reporting on financial year 2024 (published in 2025), with SMEs and non-EU parents brought in later. In 2025 the Commission's Omnibus Simplification Package proposed narrowing the scope and delaying timelines, a process still under negotiation with the European Parliament and Council.