The homogenisation of reporting standards: towards an effective sustainable business model

The ESRS are guidelines and criteria created by the European Financial Reporting Advisory Group -EFRAG- aimed at unifying non-financial documents so that sustainable information is presented in an organised, clear and transparent manner.  

On 31 July this year, the European Commission adopted the first set of ESRS applicable to all companies subject to the CSRD. The implementation of the ESRS will be progressive, coming into force between 2024 and 2028, depending on the type of company and its compliance with the Directive. For listed SMEs, it will be required from 1 January 2026, with reporting in 2027 on 2026 data, and they will be able to opt out of reporting until 2028. Despite the non-enforceability until 2026 and the possible opt-out for one year, the recommendation for listed and unlisted SMEs is that they choose to comply with the ESRS provisions on a voluntary basis, in anticipation of the possibility of being required to do so, as work is underway on specific rules for listed SMEs, and on recommendations for unlisted SMEs, with a view to their publication next year.  

One of the great advantages is that the ESRS take into account existing frameworks, such as the Global Reporting Initiative (GRI), to facilitate interoperability and thus avoid double disclosure efforts by companies. In this regard, it should be noted that a few weeks ago EFRAG and GRI published a joint statement on the high level of interoperability achieved between the ESRS and the GRI standards, which is great news for companies that report their non-financial (or sustainable) information in accordance with GRI, 82% of companies according to the organisation itself.

The United Nations Global Compact has also joined this trend of homogenisation in the reporting of non-financial information, and in 2023 a new progress report model came into force that is also aligned with other international frameworks and reporting standards. Thus, for European companies, there is a table of correspondence with European sustainability standards, so that the preparation of the progress report does not entail excessive costs for companies, which will have to report in accordance with the ESRS.  

The homogenisation of non-financial reporting standards represents a significant milestone in the business world. This convergence towards common standards not only simplifies the task of complying with regulatory requirements, but also leads to substantial savings in financial costs and human resources. By adopting consistent and internationally recognised standards, companies can take advantage of economies of scale in preparing and reporting. In addition, standardisation fosters transparency and comparability between companies, which in turn can strengthen their market position and reputation, providing companies with a powerful tool to showcase the sustainability information they have managed to bring to light after years of tremendous effort and internal work.  

At a time when the sheer volume of regulatory reporting on sustainability obligations threatens to overwhelm organisations, the standardisation of reporting standards emerges as a beacon to guide companies towards a more sustainable and efficient future, where corporate responsibility is more meaningfully and forcefully integrated into their operations and strategies.