Navigating the complexities of the European Sustainability Reporting Standards (ESRS) is crucial for businesses aiming to comply with evolving sustainability regulations. This article outlines the phased timeline for ESRS adoption, highlights the key steps companies must take to meet these new requirements, explores the tools available to support their compliance journey, and the key requirements for water-related disclosures.

Need the Gist? Check out the infographic below for a quick, visual summary of the key points!

Phased Implementation: Who Should Report and When?

The ESRS are being gradually implemented in phases based on company size, revenue, and location. The timeline for implementation is as follows:

• Large companies already reporting under the Non-Financial Reporting Directive (NFRD) will Transition to CSRD standards starting in 2024 (reporting in 2025).
• Large companies meeting two of the following criteria must comply with the CSRD in 2025 (reporting in 2026):
  • 250+ employees
  • €50m+ net turnover
  • €25m+ total assets
• Listed small-to-medium enterprises (SMEs) meeting two of the following criteria must comply with the CSRD in 2026 (reporting in 2027):
  • Small-sized (50-249 employees, €10-50m net turnover, €5-25m total assets)
  • Micro-sized (10-49 employees, €900k-10m net turnover, €450k-5m total assets)
• Third-country undertakings must comply with the CSRD by 2028 (reporting in 2029).

The ESRS apply to companies based in the EU, as well as multinational companies with significant operations or listings within the EU. Additionally, these standards encompass all economic sectors, from manufacturing to finance to services or technology, and while initially focused on large publicly listed companies, certain provisions apply to SMEs and public interest entities such as banks and insurance companies.

Key Steps for Transitioning to ESRS

Transitioning from NFRD to CSRD standards involves several key steps:

• Updating Reporting Frameworks: Modify existing reporting practices to align with the new ESRS requirements.
• Training and Development: Educate staff on new reporting standards and best practices.
• Integration and Implementation: Embed ESRS requirements into business processes and systems.

Companies should also be aware of common challenges, such as adapting to new reporting metrics and ensuring data accuracy.

Tools and Resources for ESRS Compliance

Companies can use several tools and resources to ease the transition, for example:

• Reporting Software: Platforms that facilitate data collection, reporting, and analysis.
• Consulting Services: Experts who can provide guidance on implementing ESRS requirements.
• Industry Best Practices: Guidelines and frameworks developed by industry associations.

Leveraging these resources can streamline the compliance process and improve reporting quality.

Key Requirements for Water-Related Disclosures under ESRS

The ESRS set forth specific requirements for water-related disclosures, reflecting the latest developments in sustainable water management:

• Water Consumption: Companies must disclose their total water consumption, detailing sources and any significant changes over time. This data provides insight into the scale of water use and its potential impact on local water resources.
• Water Efficiency: Reporting on water efficiency measures, such as conservation initiatives and the adoption of water-saving technologies, is mandatory. This helps stakeholders assess a company’s efforts to reduce its water footprint.
• Water Quality: Disclosures must include information about water quality management practices, encompassing monitoring, treatment, and discharge processes. This ensures that companies are mitigating their impact on water bodies and adhering to environmental standards.
• Water-Related Risks and Opportunities: Companies are required to identify and assess risks and opportunities related to water, including issues like scarcity, pollution, and evolving regulations. This aspect of the ESRS helps companies and stakeholders understand potential vulnerabilities and areas for strategic improvement.
• Water-Related Impacts: The ESRS demand that companies disclose the significant impacts of their activities on water resources, including negative effects on water quality or availability. This information is crucial for understanding the broader environmental consequences of corporate operations.
• Water Stewardship: Companies are encouraged to report on their participation in water stewardship initiatives or collaborations, highlighting efforts to engage with stakeholders and contribute to sustainable water management practices.

Adopting ESRS for Sustainable Success

At this point, something is clear: by adopting ESRS standards, companies position themselves as leaders in sustainability. Embracing these practices not only aligns with global sustainability goals but also drives operational efficiencies and strengthens market standing. As the ESRS continue to shape corporate reporting, businesses that proactively engage with these standards will be better equipped to thrive in a sustainability-focused economy.

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