European Sustainability Reporting Standards (ESRS) EFRAG in Noida

European sustainability reporting standards EFRAG are revolutionizing corporate disclosure, impacting businesses worldwide, including those operating in India like in Noida. As the European Union pushes for greater transparency and accountability in environmental, social, and governance (ESG) matters, the ESRS, developed by the European Financial Reporting Advisory Group (EFRAG), set a new global benchmark. This comprehensive framework mandates detailed reporting on a company’s sustainability impact, risks, and opportunities, ensuring stakeholders have access to consistent and comparable data. Understanding these standards is critical for any company aiming for compliance, market access in the EU, or enhanced stakeholder trust in 2026.

For businesses in Noida, a vibrant industrial and technological hub in India, adapting to these evolving global reporting requirements presents both challenges and opportunities. The ESRS necessitate a deep dive into a company’s operations, supply chains, and overall strategy to measure and report on sustainability performance. This guide will explore the core components of the ESRS, the role of EFRAG, and what companies in India must consider to align with these influential standards, paving the way for more sustainable business practices and fostering stronger international partnerships as we move into 2026.

What are the European Sustainability Reporting Standards (ESRS)?

The European Sustainability Reporting Standards (ESRS) are a set of detailed requirements mandated by the European Union (EU) for companies reporting on their sustainability performance. Developed under the framework of the Corporate Sustainability Reporting Directive (CSRD), these standards aim to make corporate sustainability reporting more consistent, comparable, reliable, and understandable across the EU. They cover a wide range of environmental, social, and governance (ESG) topics, requiring companies to disclose not only their impacts but also how sustainability issues affect their business (the “double materiality” concept).

The ESRS are designed to be comprehensive, addressing topics such as climate change, biodiversity, resource use, workforce conditions, human rights, anti-corruption, and business conduct. They move beyond voluntary reporting frameworks by making sustainability disclosures mandatory for a significant number of companies operating within or connected to the EU market. This regulatory push is transforming sustainability from a niche concern into a core aspect of corporate strategy and financial reporting.

The Double Materiality Principle

A cornerstone of the ESRS is the concept of “double materiality.” This means companies must report on two dimensions:
1. Impact Materiality: How the company’s operations impact people and the environment (e.g., its carbon emissions, waste generation, impact on local communities).
2. Financial Materiality: How sustainability issues affect the company’s financial performance, position, and future prospects (e.g., risks from climate change, opportunities from green technologies, regulatory compliance costs).
Companies must assess which sustainability topics are material from both perspectives and report accordingly, providing a holistic view of their sustainability performance and its financial implications.

Scope and Applicability

The ESRS apply to all large companies registered in the EU, listed small and medium-sized enterprises (SMEs), and non-EU companies that have significant activity within the EU market (generating over €150 million net turnover in the EU annually). The scope is broad, encompassing around 50,000 companies initially, with phased implementation beginning for financial year 2024 (reporting in 2026). This means companies worldwide, including those in Noida exporting to or operating in the EU, need to prepare for these requirements.

The Role of EFRAG

The European Financial Reporting Advisory Group (EFRAG) plays a pivotal role in the development and recommendation of the ESRS to the European Commission. EFRAG is an independent association representing a wide range of stakeholders involved in corporate reporting, including companies, investors, auditors, and academics.

Mandate and Development Process

EFRAG was tasked by the EU to develop a robust and comprehensive set of sustainability reporting standards that align with the objectives of the CSRD. The development process has been highly inclusive, involving extensive public consultations, feedback from various working groups, and collaboration with international standard-setters. EFRAG’s objective was to create standards that are practical, high-quality, and globally relevant, while also meeting the EU’s specific policy goals.

Recommendation to the European Commission

After extensive research and stakeholder engagement, EFRAG finalized its recommendations for the ESRS and submitted them to the European Commission. The Commission then reviews these recommendations and, if adopted, they are formally published as EU legislation. This formal adoption process ensures that the ESRS are legally binding within the EU framework. EFRAG continues to play a role in monitoring the implementation and potentially updating the standards as sustainability reporting evolves.

Ensuring Quality and Comparability

EFRAG’s work is crucial for ensuring the quality, consistency, and comparability of sustainability information across the EU. By setting clear, detailed requirements, the ESRS aim to prevent “greenwashing” and provide investors, consumers, and other stakeholders with reliable data to make informed decisions. This standardization is vital for the functioning of the EU’s capital markets and its broader sustainability agenda.

Key Components of the ESRS

The ESRS are structured into several categories, ensuring a holistic approach to sustainability reporting. They include cross-cutting standards, environmental standards, social standards, and governance standards.

1. Cross-Cutting Standards (ESRS 1 & ESRS 2)

ESRS 1 (General Requirements) lays down the fundamental principles, including the double materiality concept, scope, and reporting principles. ESRS 2 (General Disclosures) covers essential information on governance, strategy, impact, risk, and opportunity management, and stakeholder engagement, irrespective of the specific topical area. These form the foundation for all other disclosures.

2. Environmental Standards (ESRS E1-E5)

These standards address key environmental impacts and risks. They include:

• ESRS E1: Climate Change: Requires disclosure of greenhouse gas emissions (Scope 1, 2, and 3), climate-related risks and opportunities, and transition plans.
• ESRS E2: Pollution: Reporting on all forms of pollution (air, water, soil) and related impacts.
• ESRS E3: Water and Marine Resources: Disclosures on water dependency, withdrawal, discharge, and impact on marine ecosystems.
• ESRS E4: Biodiversity and Ecosystems: Reporting on impacts on biodiversity, protected areas, and ecosystem services.
• ESRS E5: Resource Use and Circular Economy: Disclosures on material consumption, waste generation, recycling, and circular economy initiatives.

3. Social Standards (ESRS S1-S4)

These focus on the company’s impact on society and its workforce:

• ESRS S1: Own Workforce: Covers working conditions, health and safety, training, diversity, and equal opportunities for employees.
• ESRS S2: Workers in the Value Chain: Requires reporting on the conditions of workers in the company’s upstream and downstream value chains.
• ESRS S3: Affected Communities: Disclosures on the company’s impact on local communities, including human rights issues.
• ESRS S4: Consumers and End-Users: Reporting on the impacts related to product safety, data protection, and responsible innovation for consumers.

4. Governance Standards (ESRS G1)

ESRS G1 focuses on corporate governance aspects related to sustainability, including the role of the administrative, management, and supervisory bodies, executive compensation linked to sustainability, and business conduct policies (e.g., anti-corruption).

Why ESRS Matters for Companies in Noida

For companies in Noida, a significant hub for manufacturing, IT, and services, understanding and implementing the ESRS is becoming increasingly important, especially if they engage with European markets or aspire to international standards of corporate responsibility.

Market Access and Competitiveness

Companies exporting goods or services to the EU will need to comply with ESRS if they meet the relevant thresholds. Failure to comply can result in restricted market access. Furthermore, adopting these standards can enhance a company’s reputation, making it more attractive to EU customers, investors, and business partners, thereby boosting competitiveness.

Investor Relations and Access to Capital

Global investors, including those focused on ESG criteria, increasingly demand robust sustainability data. Compliance with ESRS signals strong ESG performance and risk management, making companies more appealing to institutional investors, lenders, and financial institutions. This can lead to easier access to capital and potentially better financing terms in 2026.

Supply Chain Integration

As multinational corporations operating in the EU face ESRS compliance, they are increasingly scrutinizing their supply chains. Companies in Noida that can provide high-quality, ESRS-aligned sustainability data will be preferred suppliers, strengthening their position within global value chains. This can also drive internal improvements and operational efficiencies.

Risk Management and Strategy

The ESRS reporting process encourages companies to conduct thorough materiality assessments, identifying sustainability-related risks and opportunities. This proactive approach can lead to better strategic planning, more resilient business models, and improved risk management, helping companies anticipate and adapt to future challenges, such as regulatory changes or climate impacts.

Reputation and Stakeholder Trust

Transparent and comprehensive sustainability reporting builds trust with all stakeholders—employees, customers, local communities, and regulators. Adhering to the stringent ESRS framework demonstrates a commitment to corporate responsibility and ethical business practices, enhancing brand reputation and fostering long-term loyalty.

Preparing for ESRS Compliance in India (2026)

The transition to ESRS compliance requires a strategic and systematic approach. Companies in Noida and across India should start preparing well in advance to meet the stringent requirements by 2026.

1. Understand Your Obligations

Determine if your company falls under the scope of the CSRD and ESRS. This involves assessing your EU presence, turnover, and employee numbers. Even if not directly mandated, aligning with ESRS principles can offer competitive advantages.

2. Conduct a Double Materiality Assessment

This is a critical first step. Identify which sustainability topics are material from both an impact and financial perspective. This requires engaging with internal and external stakeholders to gather diverse perspectives.

3. Map Your Data Requirements

The ESRS specify numerous data points. Identify where this data resides within your organization, assess data quality and availability, and establish processes for data collection, validation, and reporting. This may involve upgrading IT systems and internal controls.

4. Develop or Enhance Sustainability Strategy

The reporting should reflect your company’s sustainability strategy, targets, and performance. Use the materiality assessment to refine your strategy, set ambitious goals, and integrate sustainability into core business operations.

5. Leverage Technology and Expertise

Consider using specialized software solutions for sustainability data management and reporting. Engage with consultants or experts who have a deep understanding of ESRS and CSRD to guide the compliance process, especially for initial implementations.

6. Train Your Teams

Ensure relevant teams—finance, sustainability, legal, operations—understand the ESRS requirements and their roles in the compliance process. Building internal capacity is key for long-term success.

Timeline and Phased Implementation

The implementation of the ESRS is phased, providing companies with a structured timeline to adapt. Understanding these phases is crucial for planning compliance efforts effectively.

Phase 1: Large Public-Interest Companies (FY 2024, Reporting 2026)

Companies already subject to the Non-Financial Reporting Directive (NFRD) are the first to report under ESRS for the financial year starting on or after January 1, 2024. This includes large listed companies, large banks, and large insurance undertakings.

Phase 2: Other Large Companies (FY 2026, Reporting 2026)

All other large companies that do not qualify for exemptions will need to report under ESRS for financial years starting on or after January 1, 2026. Large companies are defined as those meeting at least two of the following criteria: >250 employees, €40 million balance sheet total, or €20 million net turnover.

Phase 3: Listed SMEs (FY 2026, Reporting 2027)

Listed small and medium-sized enterprises (SMEs) will have a later reporting deadline, for financial years starting on or after January 1, 2026. An opt-out provision is available for two additional years. A simplified set of standards tailored for SMEs is also being developed.

Phase 4: Non-EU Companies (FY 2028, Reporting 2029)

Companies based outside the EU but generating significant net turnover (€150 million+) in the EU through subsidiaries or branches will need to report under ESRS for financial years starting on or after January 1, 2028. This phase significantly expands the global reach of the ESRS.

Ongoing Updates

The ESRS are designed to be a “living” framework. EFRAG will continue to monitor developments in sustainability reporting and stakeholder feedback, potentially issuing updates or sector-specific standards in the future to ensure the framework remains relevant and effective.

Challenges and Opportunities for Indian Companies

Adopting the ESRS presents a unique set of challenges and opportunities for Indian companies, including those in Noida, as they integrate global sustainability practices into their operations.

Challenges:

1. Data Collection & Systems: Gathering the required granular data, especially from diverse supply chains, can be complex and may necessitate new IT infrastructure and data management processes.
2. Expertise Gap: There may be a shortage of professionals with the specific expertise in sustainability reporting and ESRS compliance within India.
3. Cost of Implementation: Significant investment may be required for technology, training, and potentially external consultancy services.
4. Cultural Shift: Embedding sustainability into the corporate culture and decision-making processes requires a top-down commitment and organizational change.
5. Global Alignment: Ensuring that reporting aligns with other evolving global sustainability standards and frameworks can be challenging.

Opportunities:

• Enhanced Brand Reputation: Demonstrating commitment to sustainability through ESRS compliance can significantly boost brand image and stakeholder trust globally.
• Improved Investor Attraction: Access to EU markets and capital from ESG-focused investors will likely increase.
• Operational Efficiencies: Identifying resource inefficiencies and waste through the reporting process can lead to cost savings and operational improvements.
• Innovation Driver: The focus on sustainability can spur innovation in products, services, and business models, creating competitive advantages.
• Risk Mitigation: Proactively addressing sustainability risks can enhance resilience and preparedness for future environmental and social challenges.

Frequently Asked Questions About ESRS EFRAG

Conclusion: Embracing Sustainability Reporting in Noida (2026)

The European Sustainability Reporting Standards (ESRS), developed with EFRAG’s expertise, represent a significant shift towards standardized, transparent, and impactful corporate sustainability disclosure. For businesses in Noida, engaging with these standards is not merely a compliance exercise but a strategic imperative for maintaining EU market access, attracting global investment, and enhancing overall corporate reputation by 2026. The journey towards ESRS compliance requires a thorough understanding of the requirements, a robust materiality assessment, and a commitment to integrating sustainability into the core of business operations.

While challenges related to data collection, expertise, and cost exist, the opportunities for enhanced competitiveness, improved risk management, and stronger stakeholder relationships are substantial. By proactively preparing and aligning with ESRS, companies in India can position themselves as responsible global corporate citizens, ready to meet the demands of an increasingly sustainability-conscious world. Embracing these standards is a vital step towards building resilient, future-proof businesses.

Key Takeaways:

• ESRS mandates detailed ESG reporting based on double materiality.
• EFRAG plays a key role in developing and recommending these standards.
• Compliance is crucial for EU market access, investment, and stakeholder trust.
• Companies in Noida should start preparation early, focusing on data, strategy, and internal capacity.