Dive Brief:
- Global nonprofit CDP, which runs an environmental disclosure platform for more than 23,000 companies worldwide, announced Wednesday it would be aligning its disclosure system with the European Sustainability Reporting Standards, part of Europe’s larger Corporate Sustainability Reporting Directive passed this year.
- CDP estimates 50,000 businesses will be required to report under the ESRS beginning in January, and Deloitte estimates more than 3,000 U.S. companies will be forced to disclose beginning in 2026.
- CDP’s European office said the organization will work closely with the European Financial Reporting Advisory Group — a private organization who created the first draft of the eventual sustainability standards. EFRAG will provide CDP technical expertise, access and guidance during the process.
Dive Insight:
Companies that report using CDP’s platform represent two-thirds of global stock market capitalization and almost 90% of the European market’s value, the nonprofit said. The framework helps companies measure and track their performance in key sustainability areas, including climate change, pollution, water and marine resources, biodiversity and ecosystems, and resource use. CDP provides companies with annual scores on each of these categories.
Maxfield Weiss, executive director of CDP Europe, said in a release that the EU’s sustainability standards “are essential to secure a sustainable economy that works for people and planet.”
“The ESRS are a watershed — an obligation for thousands of companies inside and outside the EU to report how they impact climate change, pollution, water and biodiversity,” Weiss said. “Their implementation through the CSRD will help ensure a level playing field for and support the companies already investing in their transition.”
The ESRS takes a double materiality approach to disclosures: Businesses have to report both how climate changes affect operations and value, as well as how their operations impact the planet and its population.
The law goes into effect in the EU starting in 2024, but for U.S. companies and others headquartered outside the bloc, the European Commission recently pushed the adoption timeline for two more years. U.S. businesses now have until January 2026 to prepare to disclose their sustainability metrics to the commission.
CDP said most of the 18,700 companies that use the platform to disclose their environmental footprint were already in good shape to start reporting under ESRS, as of July, with the majority already reporting on overlapping topics.
CDP said the framework is interoperable with the International Sustainability Standards Board IFRS S2 climate-related disclosures and the Global Reporting Initiative’s framework. ISSB’s IFRS S2 standards — released in July, alongside the IFRS S1 standards for governance of sustainability risks — outline disclosures for a company’s scope 1, scope 2 and scope 3 emissions, along with targets they have set or must set by law related to climate change.
The reporting platform previously announced it would align its disclosure questionnaire with the ISSB’s standards beginning in 2024. The board’s framework has shown progress as a potential global baseline for sustainability reporting.
