Why ESRS and the CSRD are needed?
The aim of the CSRD, through the ESRS, is to help investors, consumers and other stakeholders understand the sustainability performance of companies. This is done through a disclosure approach in which a company provides ‘information on what they see as the risks and opportunities arising from social and environmental issues, and on the impact of their activities on people and the environment’.2
Regarding the introduction of the CSRD, the European Commission states the following:
The new rules will ensure that investors and other stakeholders have access to the information they need to assess the impact of companies on people and the environment and for investors to assess financial risks and opportunities arising from climate change and other sustainability issues. Finally, reporting costs will be reduced for companies over the medium to long term by harmonising the information to be provided.3
The disclosure information covers a broad range of sustainability topics, including climate change, human rights, workers, stakeholders in the value chain, circular economy and biodiversity. All ESRS are based on the double materiality concept as the basis for sustainability disclosures, which has two dimensions: impact materiality and financial materiality.
Ultimately, the aim of this EU legislation and standards is to support a transition to a more sustainable economy.
