15-11-2023
On 31 July 2023, the European Commission adopted a set of sustainability reporting standards, also known as ESRS. All companies covered by the Reporting Directive (CSRD) are required to use these standards and, for some companies, the reporting requirement will come into force as early as 2024. So, what is ESRS, what does it mean for your company, and how do you best get started with the implementation? More about that here.
By 2024, all European companies with more than 500 employees must start reporting in accordance with the latest standards from the European Commission, the so-called ESRS standards (European Sustainability Reporting Standards).
From 2025, the requirement will come into force for companies with more than 250 employees, but it is expected to affect virtually all companies in the coming years. It is no longer sufficient to report your own data, but also data from your subcontractors – known as scope 3. And this could determine who customers choose to buy their goods and services from.
As a supplier, it is crucial to implement the reporting work as soon as possible. Being ahead of the game puts you in a strong position and makes it easier for customers to choose you over competitors. Let’s start with the basics: Why is it even necessary?
Why do you need to report?
What is the purpose of these new standards and why is it important to get started?
There are several qualified answers to these questions, which we’ll dive into here. First, let’s take a look at the purpose of ESRS and why they were created.
Since the UN’s 17 Sustainable Development Goals were presented in 2016, many companies have been working towards a more sustainable business model that could live up to the goals and the ambitions they contain. Unfortunately, in the process, some companies have embellished their positive impacts and swept the rest under the carpet; a phenomenon we now know as greenwashing, which – unfortunately – often occurs against a backdrop of ignorance and unclear frameworks.
CSRD (Corporate Sustainability Reporting Directive) and ESRS (European Sustainability Reporting Standards) will help set clear rules and standards for how initiatives should be documented and reported. This will help to ensure comparability across companies and industries, so sustainability information is as uniform and transparent as possible when, for instance, applying for funding.
As mentioned, there are many benefits to getting started now, regardless of whether you are a large or small company and whether you are covered by the requirements. First and foremost, of course, it’s about staying ahead of the legislation in order to be ready if (or rather, when ) the requirements are imposed on you.
What can your company gain?
In addition, reporting and implementing eco-friendly initiatives comes with a number of benefits for your company:
- Strengthens your brand.
- Makes you more competitive.
- Meets increasing demands and expectations from customers, investors, etc.
- Increases the likelihood of loans and investments from banks, cf. the requirement for financial institutions to report on the extent of loans and investments in particularly environmentally-harmful industries.
As a supplier, according to these new standards, your ESG initiatives have an impact on your customers’ ESRS standards. This means that the better you can document your own initiatives, the easier it is for customers to see how their own reporting is affected. Being transparent in your ESG reporting can increase the likelihood of customers choosing your company over others. This is why it makes sense to get started now.
Much of this is old news by now, and you’re probably already working on it or have completed the implementation. The only difference is that there are formal requirements now for documenting and reporting on these initiatives – and that’s the part that can feel overwhelming and comprehensive for many.
If you are interested in seeing our climate goals, you can look here.
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