Governance Briefing — July 31, 2023
The European Commission adopted the European Sustainability Reporting Standards delegated act on July 31, 2023, setting uniform governance and disclosure requirements for companies in scope of the CSRD.
Executive briefing: On 31 July 2023 the European Commission adopted the delegated act establishing the first set of European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive. The act codifies governance, strategy, risk management, and metrics disclosures that large EU and certain non-EU companies must include in sustainability statements for financial years beginning in 2024.
Key requirements
- Governance disclosures. ESRS 2 mandates boards disclose sustainability oversight structures, expertise, remuneration linkages, and interaction with internal control functions.
- Double materiality. Companies must assess both impact and financial materiality across environmental, social, and governance topics, documenting methodology and stakeholder engagement.
- Assurance readiness. The standards establish data and control expectations to support limited assurance, ahead of reasonable assurance in later phases.
Implications for boards
- EU issuers. Boards must oversee ESRS implementation, ensuring governance disclosures align with committee mandates and management reporting.
- Non-EU groups. Multinationals with significant EU subsidiaries must coordinate global reporting processes and data governance to meet ESRS granularity.
- Public sector companies. State-owned enterprises subject to CSRD need cross-ministry coordination to deliver double materiality assessments and assurance-ready controls.
Action checklist
- Map existing sustainability reporting processes to ESRS governance disclosures, identifying control gaps.
- Establish double materiality assessment frameworks with documented methodologies and stakeholder engagement evidence.
- Plan assurance readiness by cataloguing data sources, IT controls, and evidence trails for sustainability metrics.
Sources
Zeph Tech enables CSRD-aligned governance programmes, double materiality assessments, and assurance readiness for ESRS-compliant reporting.