Large European (EU) companies and non-EU companies with significant EU operations, will be required to prepare sustainability disclosures in accordance with European Sustainability Reporting Standards (ESRS). Timing of the first reports is phased in over four years, depending on the size and type of entity, with the first reports for bigger entities due for 31 December 2024 year-ends. These entities may also have to report under IFRS® Sustainability Disclosure Standards issued by the International Sustainability Standards Board, including IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.
IFRS S1, a general disclosure standard, provides the overarching disclosures for various unspecified disclosure topics, while IFRS S2 relates only to the disclosure of climate-related information. Although ESRS contains two general disclosure standards, it also includes five environmental standards, four social standards and one governance standard. In addition to climate change, topics include:
- Environment - pollution, water and marine resources, biodiversity and ecosystems, and resource use and the circular economy
- Social - own workers, workers in the value chain, affected communities, and consumers and end-users
- Governance - business conduct.
Streamlining your sustainability reporting and determining which standards require what disclosures can be difficult and time-consuming. To assist, the IFRS Foundation and the European Financial Reporting Advisory Group (EFRAG) recently published guidance material to illustrate how IFRS S1 and IFRS S2 disclosures align with the ESRS.
The ESRS–ISSB Standards Interoperability Guidance provides practical support and explains how companies can efficiently comply with both sets of standards. It:
- Describes how general requirements align, including key concepts such as materiality, presentation, and disclosures for sustainability topics other than climate
- Provides information about how climate disclosures align across the two sets of standards, and what a company starting with either set of standards needs to know for them to comply with both.
Section 2, in particular, shows a table of the equivalent paragraph references for similar disclosures.
More information
Please refer to the ESRS–ISSB Standards Interoperability Guidance for more information.
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With more than one reference source to consider, preparing your sustainability disclosures complying with both IFRS Sustainability Disclosure Standards and ESRS can be daunting. Our sustainability reporting experts are here to help. Please contact us today.