The European Commission’s recent announcement on July 31st marks a major turning point for sustainability reporting in the European Union. The adoption of the European Sustainability Reporting Standards (ESRS) is set to reshape how companies report their sustainability practices and impacts. This new directive will have far-reaching implications, especially for tech and IT companies that play a significant role in the region’s economic landscape.

Expanding Reporting Requirements

With the implementation of the Corporate Sustainable Reporting Directive (CSRD), the ESRS is poised to significantly expand the number of companies required to disclose sustainability information. While around 12,000 companies currently report under the Non-Financial Reporting Directive (NFRD), the ESRS will extend this requirement to cover over 50,000 organizations. The standards cover the full range of environmental, social, and governance issues, including climate change, biodiversity, and human rights. They provide information for investors to understand the sustainability impact of the companies in which they invest.

Sustainability Reporting Solutions: The Rising Demand

Tech companies specializing in sustainability reporting solutions are expected to witness a surge in demand. As companies gear up to comply with the ESRS, they will be on the lookout for innovative software capable of compiling, analyzing, and presenting sustainability data in a clear and understandable format. The ESRS’s emphasis on integrating financial and non-financial data will also drive demand for integrated reporting platforms. Tech companies with expertise in financial software may look to expand their product offerings to include sustainability data, providing a comprehensive, all-in-one solution for businesses seeking streamlined reporting processes. This integrated approach aligns with the EU’s vision of cohesive and transparent corporate reporting. The European Commission points to “ample evidence that the sustainability information that companies currently report is not sufficient. They often omit information that investors and other stakeholders think is important. Reported information can be hard to compare from company to company, and users of the information, such as investors, are often unsure whether they can trust it.”

Timeline and Implementation

The ESRS delegated act adopted by the Commission will be formally transmitted in the second half of August to the European Parliament and the Council for scrutiny. The scrutiny period runs for two months, extendable by a further two months. The European Parliament or the Council may reject the delegated act, but they may not amend it.

Companies will have to start reporting under ESRS according to the following timetable:

• 2024: Large Listed Companies, Banks, and Insurance Undertakings with More Than 500 Employees
• 2025: Other Large Companies, Including Non-EU Listed Companies
• 2026: Listed SMEs (with the option to opt-out for two additional years)
• 2028: Non-EU Companies Generating Over EUR 150 Million in the EU (with separate standards)

Showcasing Expertise and Driving Change

Engaging with IT practitioners and company stakeholders through webinars, podcasts,  on-camera interviews, and featured articles,  tech companies can leverage thought leadership to drive positive change in efforts to meet EU sustainability reporting initiatives. Providing expert insight and thoughtful perspective,  tech executives can shape the discourse around sustainability reporting.  As a leading platform exploring the intersection between sustainability and tech, thought leadership platform EcoTech Insights emphasizes the significance of educating the market about ESRS and its impact. By embracing innovation and transparency, tech and IT companies can set a high standard for the industry, inspiring others to follow suit and contribute to a more sustainable and transparent business ecosystem.

Embracing the New Era

The adoption of the ESRS brings forth a new era in sustainability reporting for the EU. As businesses adapt to meet the new requirements, tech, and IT companies have an unprecedented opportunity to lead the way, offering transformative solutions that drive sustainability and corporate transparency.