ESG Today writes that some sustainability-focused investors expressed concerns over the fact that some reporting requirements are not mandatory anymore, although they are still part of the ESRS. Still, the new reporting framework represents the biggest update to the package since it was originally introduced back in 2014.

One of the biggest changes is that the new rules will expand the number of required companies who will have to comply with reporting, from 12.000 right now, to over 50.000 starting 2024. Another change refers to companies with less than 750 employees in the first year that they apply the sustainability standards, which won't have to report anything on Scope 3 emissions, biodiversity or "own-workforce" during this time.

Investors believe that the easing offd some of the sustainability-related reports could mean that they will have a harder time choosing a specific company for financing and it may even reduce their own ability to meet their own reporting requirements.

In order to ease off the concerns of the investors, EU officials mentioned that the new ESRS standards are interoperable with the standards from both the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI).

The Commission's new reporting standards have been passed now to the EU Parliament and the Council, with each body able to reject the act, but not to modify it in any way.

Should the new rules be implemented, companies who reported under the Non-Financial Reporting Directive (NFRD) and large non-EU listed companies with over 500 employees will have to switch to the new reporting standards from the 2024 financial year. This means that we should see the new sustainability reports from 2025.

For other companies, reporting under the new standards will start at a later date, such as for listed SMEs, which will have to provide the required information from 2027 onwards.

"In addition, non-EU companies that generate over EUR 150 million per year in the EU and that have in the EU either a branch with a turnover exceeding EUR 40 million or a subsidiary that is a large company or a listed SME will have to report on the sustainability impacts at the group level of that non-EU company as from financial year 2028, with first sustainability statement published in 2029. Separate standards will be adopted specifically for this case", said the EU officials in a statement. They also shared more information on the new standards they've adopted for sustainablity reporting in this Q&A and you can find out more on the topic.