Sustainability reporting: Are you ready to embrace it?

The EU's Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) are two new regulations that will change the way insurance companies report on their sustainability performance and impact. They are part of the EU's efforts to achieve its climate and environmental goals, as well as to foster a more sustainable and resilient economy.

The CSRD and the ESRS are expected to have a significant impact on the corporate sustainability reporting landscape in the EU and beyond, and to create new opportunities and challenges for insurance companies and their stakeholders. Here are some key points about the CSRD and the ESRS:

?? The CSRD is a new law that aims to improve the quality and consistency of corporate sustainability reporting across the EU. It applies to all large companies and all listed companies (except listed micro-enterprises) in the EU, as well as foreign companies that are listed on EU markets. Insurance companies, no matter the size, are part of the strict club of public interest companies. The CSRD entered into force on 5 January 2023, and the first companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025.

?? The ESRS is a set of common and mandatory standards for sustainability reporting that apply to the companies covered by the CSRD. The standards are developed by an independent body, the EFRAG, and adopted by the European Commission. The ESRS covers a range of sustainability topics, such as environmental, social, human rights, anti-corruption, and governance issues. Companies have to disclose how these topics affect their business performance and prospects, as well as how their activities impact people and the planet. This is known as the "double materiality" perspective.

?? The CSRD and the ESRS are based on EU policies and international initiatives, such as the Task Force on Climate-related Financial Disclosures (TCFD) and the UN Sustainable Development Goals (SDGs). They aim to ensure a high degree of interoperability between EU and global standards and to prevent unnecessary double reporting by companies. The CSRD and the ESRS require companies to have their sustainability reports verified by an external auditor, to ensure the reliability and comparability of the information. The reports have to be published together with the annual financial statements, and made available on a public database.

?? The CSRD and the ESRS aim to benefit various stakeholders, such as investors, consumers, civil society, regulators, and the companies themselves. By providing more and better information on sustainability, the CSRD and the ESRS can help investors make informed decisions, consumers make responsible choices, civil society monitor corporate behaviour, regulators enforce compliance, and companies improve their performance and reputation.

The specific standards for the insurance industry are now due in June 2025 only. However, it is expected that those will be aligned with the GRI Standards, from the Global Reporting Initiative. The GRI Standards are a set of global standards for sustainability reporting, developed by an independent organization that promotes transparency and accountability for the impacts of organizations on the economy, environment, and society. The GRI Standards are designed to help organizations of any size, sector, or location to report on their sustainability performance and impact in a comparable and credible way. The GRI Standards are relevant for the insurance industry, as it is a sector that faces significant risks and opportunities related to sustainability issues, such as climate change, human rights, social inclusion, and governance. The insurance industry plays a key role in providing protection, risk management, and investment solutions for individuals, businesses, and society as a whole. Therefore, it is important for the insurance industry to disclose how it manages its sustainability impacts and contributes to the achievement of the UN SDGs.

The CSRD and the ESRS are a significant step forward in the transition to a sustainable and resilient economy in the EU and beyond. They are expected to have a major impact on the corporate sustainability reporting landscape and to create new opportunities and challenges for companies and stakeholders. It is a brave and challenging new world that the insurance industry must and will embrace.

The CSRD and the ESRS are not only a regulatory challenge, but also a strategic opportunity for the insurance industry to demonstrate its value and relevance in a changing world. The question is: Are you ready to embrace it?