The majority of companies reporting through CDP, the non-profit organisation that runs the global environmental disclosure system for companies, are already in part prepared for the new mandatory European Sustainability Reporting Standards (ESRS).

Following the European Commission adoption of the ESRS this week, companies inside and outside the European Union will now have to report their impact on climate change, pollution, water, oceans, and biodiversity, including forests and circular economy.

Several industry organisations welcomed the Commission’s move, but some have called for clear materiality assessments.

Furthermore, CDP data shows that many companies are already stepping up and reporting on elements of the new mandatory rules.

From the more than 18,700 companies around the world disclosing to CDP – including corporations representing around 75% of the European market capitalisation – 18,000 organisations report on board-level oversight and around half of companies (55%) already have a process in place to assess climate risks and opportunities, a crucial step toward transparently disclosing climate and environmental information to stakeholders, the firm disclosed.

Companies disclosing voluntarily through CDP show preparedness on some of the critical information required under the ESRS – topics of governance, strategy, risks and opportunities, and metrics and targets.

However, it remains to be seen how corporations, both inside and outside Europe, will generally fare once the ambitious new set of standards for environmental responsibility starts applying in 2024, CDP noted.

Mirjam Wolfrum, policy engagement director for Europe at CDP, said: “The much-anticipated adoption of the ESRS marks the dawn of a new age of environmental responsibility in business and financial planning. With approximately 50,000 companies now obligated to report on sustainability, these standards are a critical stepping-stone towards making high quality environmental reporting a business norm.

“However, compromises were made to ensure successful adoption: all disclosures, including climate related, are now subject to companies’ own materiality assessment. In addition, certain disclosures including scope 3 emissions and all of biodiversity related disclosures have been phased in. Understanding why companies disregard certain topics will be essential to ensure comparable and meaningful information for investors, auditors, and regulators.”

With the ESRS applying to more than 50,000 companies, with some required to also report under other standards and frameworks, CDP’s global disclosure system will evolve to provide disclosure channels reflecting the environmental reporting requirements being developed by the ESRS, providing investors with standardised, comparable data produced across regions and regulatory requirements.

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