Commission Delegated Regulation (EU) 2023/2772 as regards sustainability reporting standards

Following the finalization of the standards in July 2023 (EventID 22310), the EU Commission has published in the Official Journal of the EU Commission Delegated Regulation (EU) 2023/2772 containing a first set of sustainability reporting standards, the so called European Sustainability Reporting Standards (ESRS), to be observed by undertakings listed on an EU exchange and by parent undertakings of large groups. These standards aim to encompass, at a minimum, the information required by financial market participants to fulfill their disclosure obligations as outlined in Regulation (EU) 2019/2088 of the European Parliament and of the Council, the Sustainable Finance Disclosure Regulation (SFDR).
The standards define, among other things the general objective of the disclosure requirements which is to enable users to understand a firm’s „impacts, risks and opportunities in relation to environmental, social or governance matters“. They further include some general obligations relating to the quality of the information to be presented (faithful, comparable, verifiable, understandable).
In addition, the standards describe the structure in which information shall be presented, beginning with some general ESG-related information such as a firm’s strategy in this context, its greenhouse gas emissions, or its expectations as regards financial effects from material physical and transition risks and potential climate-related opportunities, to environmental and social information (e.g. the working conditions for employees, stance on payment and equal treatment of staff, etc). It concludes by requiring information on a firm’s governance, including information, for example, on a firm’s business conduct policies and corporate culture in relation to ESG. In this context, it may be noted that not all information must be disclosed right from the beginning. Some information will be phased in as described in Appendix C of the Delegated Regulation. The following graphic illustrates the form in which information shall be made available:
Graphic 1: Information to be disclosed by affected entities

To help in-scope firms to determine which information to include in the disclosures, the Regulation also contains a flowchart in this matter (Appendix E). Likewise, it contains an example of how firms should go about when they intend to include information by reference only (Appendix F). And finally, the regulation describes in great detail all the information that should be presented by firms in their sustainability reports.