EU adopts groundbreaking sustainability reporting standards
The European Commission announced on July 31 that it has adopted the European Sustainability Reporting Standards (ESRS), a crucial step towards comprehensive sustainability reporting within the EU. These new standards, set to take effect from the financial year 2024, will impact more than 50,000 companies, including large real estate firms, and will ensure more detailed reporting on the environment, human rights, and social standards.
For larger real estate companies, this has immediate implications: ESRS, part of the Corporate Sustainable Reporting Directive (CSRD), will apply to all publicly listed companies, public interest entities, and companies that meet two of the following three criteria:
- More than 250 employees
- More than 40 million euros in revenue per year
- More than 20 million euros on the balance sheet
Although the announcement of this milestone was generally welcomed, sustainability-focused investor groups have expressed concerns about a recent decision by the EU Commission. This decision involved easing several aspects of the new rules, particularly the removal of the mandatory nature of many of the CSRD's sustainability disclosures, an aspect that remained in the adopted ESRS. The CSRD, expected to begin applying from the beginning of 2024, is aimed as a major update to the 2014 Non-Financial Reporting Directive (NFRD), the current EU sustainability reporting framework. The new rules will significantly expand the number of companies required to provide sustainability disclosures to over 50,000 from around 12,000 currently, and introduce more detailed reporting requirements on company impacts on the environment, human rights, social standards, and sustainability-related risk.
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