Seasoned ESG expert at Workiva, Henrik Sandin, shares his in-depth knowledge of the European Sustainability Reporting Standards (ESRS), providing businesses with actionable strategies to navigate compliance in 2025 and beyond.
Many companies will have reported voluntarily on their sustainability obligations, targets and deliverables for some time. These disclosures will have sat outside the structures and systems they have in place for their annual financial reports, as that has not been a requirement to date.
Now, the European Commission has published its European Sustainability Reporting Standards (ESRS), as a framework for corporate sustainability reporting that examines risks and opportunities alongside a company’s environmental and social impacts. This introduces sustainability disclosures into the annual report, alongside the financial disclosures.
What are the European Sustainability Reporting Standards (ESRS?)
The ESRS are being phased in over time according to companies’ size and scope. The earliest any companies are required to report is in 2025 for the 2024 fiscal year. UK companies are impacted when they have listed securities on a regulated European market or have subsidiaries operating in the EU.
The standards provide a reporting framework for the Corporate Sustainability Reporting Directive (CSRD) which requires companies to report on the risks and opportunities arising from social and environmental issues and their own impact on the environment and society.
Companies that report on risks and opportunities in this way equip investors to assess their suitability for investment, and help other market participants decide whether to do business with them. Environmental and sustainability reporting in general equips all stakeholders to evaluate a company’s performance in these crucial areas. CSRD effectively brings together the ‘E’, ‘S’, and ‘G’ of ESG reporting in a more cohesive and coherent manner.
The ESRS comprise 12 standards – general requirements, general disclosures, climate, pollution, water and marine resources, biodiversity and ecosystems, resource use and circular economy, own workforce, workers in the value chain, affected communities, consumers and users, and business conduct.
How can companies prepare for ESRS?
The ESRS pose a range of challenges for companies. Firstly, the size of the reporting challenge. In all, the 12 standards equate to over 1,000 data points that companies must be able to measure and report on. Of these data points, 60-70% are qualitative, bringing in a level of narrative text disclosure not previously seen in the annual report.
Secondly, the scope of ESRS which take a ‘double materiality’ perspective, requiring companies to report on both their impacts on society and the environment (‘inside-out’), and the risks and opportunities to them from social and environmental issues (‘outside-in’). Companies will need to understand their takeholder boundaries to report consistently on their value chain. For example, where does a manufacturing value chain begin? Is it with raw materials or raw material extraction?
Organisations must stay on top of their ESG reporting by evaluating their processes at least one year ahead of mandatory reporting. It can take time for companies to fully integrate ESG reporting practices, and progress often depends on the size of company and level of maturity in their sustainability operations and reporting. There is no one-size-fits-all approach, but it is fundamental for companies to get ahead of reporting obligations sooner rather than later.
Companies impacted first – those reporting in 2025 for financial year 2024 – should be well into remediation now, where they will have identified any gaps and incorporated ESRS into their annual report planning. They should have a structure in place, know who owns which activities and who signs off. They should also have involved their departments, such as internal audit and compliance, to ensure regulation is accurately applied and processes and controls are defined.
For phase two – companies reporting in 2026 for financial year 2025 – mandatory reporting of this nature is new. These companies must start doing their assessments now, because ESRS reporting will be very different from voluntary reporting.
They must assess their operations, and value chain, to identify material topics, as well as current data, process and controls to ascertain if they can report on these material topics in line with the ESRS requirements. The next step will be to put a programme in place to mitigate any identified gaps. This project must have clear ownership, objectives, tasks and a timeline to succeed.
How integrated reporting helps meet the demands of ESRS
ESRS ushers in a new era of unified sustainability and financial reporting. Preparation is key, as is incorporating ESRS into the company’s overall ESG strategy. Companies should set achievable, but ambitious, targets to report against and be able to evidence processes that will stand up to scrutiny. An integrated report should reflect a fully unified, cohesive and consistent way of working within the organisation and, for some, this will mean reappraising team structures and collaboration to drive integration throughout the whole company.
There are resources to help, including platforms to connect to data sources, build data sets and deliver insights to reports. A Workiva survey of ESG practitioners revealed that 95% agree having adequate technology is critical to successfully managing the ESG reporting process. Companies should look to assured integrated reporting to help them meet the demands of ESRS, alongside existing ESG obligations.
The ESRS provide the reporting framework companies need for CSRD. They also mark a new milestone in integrated ESG reporting. Companies must assess the impact of ESRS on their activities and reporting obligations. They can take this opportunity to align their activities, processes and systems to support an integrated ESG approach. Preparation is essential if companies are to be ready when their time comes to begin reporting, and it begins with an approach that integrates ESG into companies’ strategies, operations and governance.
About Author
Henrik Sandin is a Director, Principal ESG Specialist for Workiva and brings over 16 years of
experience in advising global banks and corporates on regulations, process enhancement and
reporting frameworks. Henrik focuses his time at Workiva assessing current and future ESG
regulations and what impact such regulations have on their products and customers.
Before joining Workiva, Henrik spent nearly 12 years at Deloitte in their Risk Advisory practice in
London, Zurich and New York. Henrik is a member of EFRAG’s Digital Reporting Consultative Forum
advising EFRAG on the creation of the ESRS XBRL Taxonomy.
