In a rapidly evolving corporate world, the focus on sustainability has never been more critical. The adoption of the European Sustainability Reporting Standards (ESRS) on July 31, 2023, marks a significant milestone in the European Union’s commitment to environmental, social, and governance (ESG) transparency.

Mandatory Compliance: A Turning Point in ESG Reporting
The ESRS are now mandatory for approximately 50,000 companies within the EU and an additional 10,000 companies outside the EU with significant operations in Europe. These standards require companies to conduct a robust assessment of their business activities’ impact on the environment and climate.

Transparency in Climate Credits: A New Requirement
Under the Corporate Sustainability Reporting Directive (CSRD), companies are also required to be transparent about their use of climate emission credits, especially if they are used to support claims of GHG neutrality. Companies must explain that the use of these credits does not hinder or reduce their ambition to transition towards reducing climate emissions.

“Companies must adhere to credible and high-integrity climate emission credits that meet recognized quality standards (ESRS E1-7.61).”

Detailed GHG Emission Goals
Companies are required to report their GHG emission goals for Scope 1, 2, and 3 emissions, either separately or combined. These goals must be gross goals, meaning companies cannot include GHG removals, carbon credits, or avoided emissions as a means to achieve their GHG emission targets.

How Non-EU Companies Are Affected
Non-EU companies are not exempt from the CSRD’s reach. They will be affected in three key ways:

• Companies with securities listed in the EU.
• Companies with significant activity in the EU.
• Parent companies of in-scope EU subsidiaries.

The Future of ESG Reporting
The CSRD and ESRS are not just regulatory requirements but a call to action for companies to play their part in mitigating global challenges like climate change and social inequalities.

“The path toward sustainability is a collective journey, and the new standards serve as a roadmap for companies to follow.”

Through our projects, we can help your company balance the scope 2 and 3 emissions, in your company’s journey to become net-zero and mitigate climate change.