What is the Difference Between CSRD and ESRS?
31st August 2023
31st August 2023
In today’s rapidly evolving business landscape, environmental, social, and governance (ESG) considerations have become integral to corporate operations and strategy. As societies place increasing importance on sustainability and responsible business practices, regulatory frameworks have emerged to guide and standardise sustainability reporting.
The EU is at the forefront of this movement, introducing two key initiatives: the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standard (ESRS), which are pivotal to the EU’s efforts to enhance sustainability reporting practices across member states. While interconnected, these two initiatives serve distinct purposes within the larger context of corporate sustainability transparency.
In this article, we will delve into the distinctions, objectives, and implications of these two critical components of the EU’s sustainability framework.
In essence, the ESRS is a reporting standard that will be used to meet the requirements of the EU CSRD.
So whilst the CSRD sets out reporting requirements and obligations, the ESRS provide the framework and methodology for reporting.
The CSRD, introduced to replace the Non-Financial Reporting Directive (NFRD), mandates that large and listed companies within the EU report on a comprehensive array of ESG indicators. This includes greenhouse gas emissions, employee well-being, and diversity and inclusion. The primary objectives of the CSRD are threefold:
Complementing the CSRD is the ESRS, which delineates the specifics of how companies should report sustainability information to comply with the directive. The ESRS provides a structured framework for reporting, covering a range of environmental, social, and governance aspects and outlines how and what information and ESG metrics companies need to report to comply with the CSRD. Notable features of the ESRS include:
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While the CSRD and ESRS are interconnected, they serve distinct functions. The CSRD sets the legal framework and reporting obligations, while the ESRS provides the roadmap for compliance. Companies subject to the CSRD need to navigate these differences strategically to ensure accurate and timely reporting.
Implementing the CSRD and adhering to the ESRS present a range of challenges and opportunities for companies. From defining the scope of reporting to collecting and analysing relevant data, businesses must carefully plan their sustainability reporting journey. Ensuring data accuracy, selecting appropriate reporting processes, and staying abreast of ESRS developments are essential steps.
The CSRD and ESRS represent a critical step forward in the EU’s journey toward a more sustainable business landscape. By harmonising reporting practices and elevating the quality of disclosed information, these initiatives empower stakeholders to make informed decisions, drive positive change, and contribute to a more equitable, sustainable future. As companies align with these frameworks, they not only comply with regulatory requirements but also position themselves as leaders in sustainability, capable of navigating the complex terrain of ESG considerations with confidence and purpose.