Australian companies with European ties may be impacted by the introduction of European Sustainable Reporting rules. While Australian companies have been focused on potential implications of initial sustainability reporting standards from the International Sustainability Standards Board (ISSB) and the expected local issuance by the Australian Accounting Standards Board, the European Union has adopted European Sustainability Reporting Standards (ESRSs), which may have flow on implications.
On July 31, 2023, the European Union adopted its first set of ESRS, which could also affect some Australian companies. These ESRS usher in a new phase of corporate reporting in the EU, covering a broader range of content compared to ISSB standards and impacting various companies beyond the EU's borders. ESRS will apply to Large EU companies, listed EU companies (excluding micro-undertakings), and non-EU parent companies with a group turnover in Europe of at least EUR 150 million. If your company is a subsidiary of a European entity or has significant European operations, you may fall under this new reporting framework or be required by your European parent to contribute information to their ESRS reporting.
The key dates for ESRS compliance are:
- Large companies (500+ employees) start reporting in the 2024 financial year (reporting in 2025).
- Other large companies follow suit in the 2025 financial year (reporting in 2026).
- Smaller listed companies must adopt ESRS in the 2026 financial year (reporting in 2027).
- Non-EU parent companies should adopt ESRS by 2028 (reporting in 2029).
While these deadlines may seem distant, preparing for these standards requires significant effort. Although ESRS and ISSB standards share some similarities, they are not identical. ESRSs are designed to provide information for a broader user group, demanding additional information beyond Australian sustainability reporting which is aligned with ISSB standards and focused solely on the needs of investors.
While ISSB focused initially on climate change impacts, ESRS standards encompass a wider range of ESG (Environmental, Social, Governance) concepts. This includes disclosures about environmental concerns like pollution, water, biodiversity, and resource use, alongside social issues related to workforce, value chain employees, consumers, and affected communities. Governance disclosures on business conduct are also part of the requirements. Even though the EU aims to issue simplified standards for SMEs and Non-EU parents, it's expected that similar topics will be covered.
Preparing for these sustainability disclosures can be complex and challenging as it often involves collection of data that is not already captured in your internal reporting systems. Accordingly, now is the time to start identifying the information required and updating your reporting systems to collect that data.
If you think you may be impacted by these new ESRS requirements, or are interested in sustainability reporting more generally, please contact your local Moore Australia advisor and we can help you to understand your obligations and help you develop a strategy to meet your reporting obligations.