Solutions for expanded ESG reporting according to EU standards

In response to the growing demand for trans­parency and account­ability in environ­mental, social and gover­nance (ESG) practices, the European Commission has created a new regulatory framework Corporate Sustain­ability Reporting Guideline (CSRD). This policy requires companies to report their ESG data annually for financial years beginning on or after January 1, 2024.

To meet these stringent require­ments, Thomson Reuters and SAP worked together to develop a solution a robust reporting solution. By combining the power of ONESOURCE Statutory Reporting with The Sustain­ability Control Tower from SAPThis partnership equips corporate sustain­ability leaders with the tools they need to efficiently collect, manage and archive their ESG data. This ensures compliance with the European Sustain­ability Reporting Standards (ESRS) and promotes trans­parency in corporate reporting.

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Simplifying ESG reporting compliance through technology and partnerships

Technology plays a critical role in enabling companies to meet the new ESRS require­ments. To help companies comply with these standards, Thomson Reuters and SAP have partnered to develop a new compre­hensive solution.

ONESOURCE Statutory Reporting with SAP’s Sustain­ability Control Tower, scheduled to launch later this year, will centralize the collection and management of all ESG metrics and metrics. It is intended to help companies comply with legal regula­tions and contribute to risk reduction through optimization the process of collecting, managing and reporting ESG data.

Companies must use an XBRL digital taxonomy to tag (tag) their disclo­sures in ESRS reporting to ensure an electronic reporting format. Our integrated tagging elimi­nates the need for outsourced iXBRL tagging, stream­lining the ESRS reporting process. Additionally, this integration provides seamless access to integrated ESG data, increasing produc­tivity and providing a compre­hensive and efficient solution to meet CSRD require­ments.

Our latest ESG reporting solution is specif­i­cally tailored for those operating in the European Union or the United Kingdom. This integration helps address some of the key challenges faced by those managing ESG reporting in large multi­na­tional companies. It facil­i­tates the collection of both financial and non-financial data from different parts of the organi­zation and enables central storage and efficient reporting.

A solution designed to meet ESRS require­ments can be better assessed for its ability to handle the complex­ities and require­ments if we look back at the history of the standards. This helps us under­stand who these standards will impact, what these new require­ments will entail, and recog­nizes the critical role of technology in compliance.

The development of the European Sustainability Reporting Standards (ESRS)

The European Union (EU) has a long history of environ­mental awareness and sustain­ability initia­tives that predate the specific devel­opment of ESRSs. This journey began in the 1970s with the intro­duction of the first Environ­mental Action Program in 1973. It was during this period that the founda­tions of funda­mental environ­mental regula­tions and insti­tu­tions were laid. Below is the progressive schedule of the ESRS:

• 1973: The launch of the first Environ­mental Action Program laid the foundation for funda­mental environ­mental regula­tions and insti­tu­tions.
• 2014: Accep­tance of the Non-Financial Reporting Directive (NFRD) required large public interest companies to disclose infor­mation about social and environ­mental impacts.
• 2018: Intro­duction of the Action plan to finance sustainable growth The aim was to redirect capital into sustainable invest­ments and manage financial risks related to climate change and other environ­mental issues.
• 2019: The presen­tation of the European Green Deal Set yourself the ambitious goal of Europe becoming the first climate-neutral continent by 2050.
• 2020: The Corporate Sustain­ability Reporting Directive (CSRD) proposal aimed to improve and standardize sustain­ability reporting across the EU.
• 2021: The formal adoption of the CSRD proposal marked the intro­duction of the European Sustain­ability Reporting Standards (ESRS).
• 2022: The final CSRD was published in the Official Journal of the European Union on December 16, 2022.
• 2024: The European Union ESRS came into effect for financial years beginning on or after January 1, 2024.

The devel­opment and final­ization of the ESRS by the European Financial Reporting Advisory Group (EFRAG) required extensive stake­holder engagement to ensure robustness and practi­cality. These standards aim to redefine corporate respon­si­bility across the EU by providing a clear framework for reporting on the environ­mental and social impacts of business activ­ities.

This initiative addresses the need for consistent sustain­ability reporting and ensures that stake­holders – including investors, customers and regulators – have access to reliable and compa­rable data for informed decision-making.

Double materiality and increased granularity

A ground­breaking feature of the ESRS is the concept of dual materi­ality, which requires companies to report not only how their opera­tions impact the environment and society, but also how these external factors impact their financial perfor­mance. This dual perspective offers a holistic view of sustain­ability and under­scores the essential connection between the health of companies, the health of our planet and its people.

Companies must provide detailed infor­mation on gover­nance, strategy, impact management, risk and oppor­tunity management as well as sustain­ability metrics and goals. This increased granu­larity presents a signif­icant challenge and requires robust systems and processes for data collection, management and disclosure.

Which companies must comply with ESRS reporting?

The scope of the ESRS is broad and covers all large and most listed EU companies, including large subsidiaries of non-EU parents. Specif­i­cally, non-EU companies that generate net sales of more than 150 million euros within the EU also fall under these regula­tions.

From 1 January 2024, large companies with more than 500 employees, including EU public interest companies and non-EU firms with securities listed on EU markets, will now have to comply with ESRS reporting require­ments under the CSRD.

Other large companies must begin reporting from January 1, 2025, while listed small and medium-sized enter­prises (SMEs) must begin reporting from January 1, 2026. Non-EU companies with signif­icant EU business — those with a net turnover of more than 150 million euros and signif­icant subsidiaries or branches with a turnover of over 40 million euros — will be required to report from January 1, 2028.

A large company is considered to meet at least two of the following criteria: over 250 employees, over 40 million euros in net sales or over 20 million euros in total assets. From 2028, non-EU parent companies with signif­icant EU activ­ities will also have to comply with global reporting standards specif­i­cally tailored to non-EU companies.

A sustainable future with ESG reporting solutions

The intro­duction of the ESRS marks a signif­icant change in corporate sustain­ability reporting. By imple­menting these standards, companies not only comply with current regula­tions, but also contribute to a more sustainable and trans­parent global economy. As challenging as this transition may be, it is a crucial step towards a sustainable future and reinforces the idea that business success and environ­mental protection can go hand in hand.

When you choose the integrated solution from Thomson Reuters and SAP, you’re not just investing in a reporting tool — you’re also enabling your company to excel in sustain­ability and corporate respon­si­bility while optimizing your ESG processes. With this technology, your company can embrace the future of ESG reporting today.