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European standards for companies’ sustainability reports, approved by the Commission

European standards for the submission of sustainability reports by companies have been approved by the Commission, according to an announcement by the Cyprus Organization for Standardization (CYS).

The announcement states that “this is an important step towards ensuring transparency regarding the impact of business practices on environmental, social and governance issues”.

It is also noted that the new sustainability reporting standards will help encourage the sustainable investments needed to achieve Europe’s green transition goals.

“On 31 July 2023, the European Commission adopted the delegated act on the first set of European Sustainability Reporting Standards (ESRS),” the announcement reads. He also adds that the new European Directive “describes the obligation of companies to use standards to fulfill their legal obligations to submit sustainability reports and for this reason the Commission is establishing common standards that will help companies communicate and manage their performance more effectively in terms of their sustainability and therefore have better access to sustainable finance.’

In particular, as clarified, the inclusion of the reporting requirement under ESRS 2 “General Disclosures”, requires all large companies and all listed companies (except listed micro-enterprises) to disclose information about risks and opportunities arising from social and environmental issues, as well as about the impact of their activities on people and the environment according to mandatory sustainability reporting standards.

It is noted that the European Organizations for Standardization, CEN and CENELEC, in cooperation with the International Organizations for Standardization, ISO and IEC, are developing various standards that help companies improve their sustainability by providing comparable measurements and clear guidance for the implementation of sustainability processes.

CYS explains that the European Sustainability Reporting Standards (ESRS) will be mandatory for companies required by the Accounting Directive to submit sustainability information. By requiring the use of common standards, the accounting directive, as amended by the CSRD in 2022, aims to ensure that companies across the EU report comparable and reliable sustainability information.

“High-quality and reliable public reporting by companies will help create a mindset of greater public accountability,” he notes, adding that “it helps investors, civil society organizations, consumers and other stakeholders assess sustainability performance of companies”.

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