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Regulations / Europe
Asia gets more time for ESRS implementation
Region moving quickly to align with EU sustainability, notably in Singapore, SK, Taiwan
Bayani S. Cruz 10 May 2024

Asian corporates that do business in the European Union will have two more years to prepare for the implementation of the European Sustainability Reporting Standards (ESRS), which set the sustainability reporting rules and requirements for companies operating in the EU, following the postponement of the adoption date from June 2024 to the new deadline of 2026.

The postponement was approved by the EU Council in a directive issued last month in order to allow non-EU companies to focus on the implementation of the first set of ESRS and reduce the reporting requirements for companies to a necessary minimum, as well as to provide more time for the development of the sector-specific and non-EU companies reporting standards.

The postponement stands to benefit companies and regulators in the Asia-Pacific region that are moving quickly to align themselves with the new rules ahead of their implementation, particularly in Singapore, South Korea and Taiwan.

The ESRS is under the EU’s Corporate Sustainability Reporting Directive (CSRD) and the standards developed by the International Sustainability Standards Board (ISSB) under the auspices of the International Financial Reporting Standards (IFRS).

The first set of ESRS standards, which set out sector-agnostic sustainability reporting requirements, was adopted by the EU in July 2023; however, the CSRD required the adoption of sector-specific ESRS by the end of June 2024. The new directive means the adoption of the sector-specific ESRS has been moved to 2026.

Before the postponement, financial centres, such as Hong Kong, Japan and Singapore, were proactively driving formal adoption of the disclosure rules developed by the ISSB, targeting fiscal years 2025 and 2026.

At the same time, India and China, according to an April 2024 study by ISS-Corporate entitled Sustainability Disclosures in Asia-Pacific: Accelerated Transition to New Standards, are charting their own paths on sustainability disclosures.

To identify which countries and sectors are better prepared to meet the more ambitious requirements of CSRD and the IFRS Sustainability Disclosure Standards, ISS-Corporate reviewed the level of alignment of corporate disclosures in major Asia-Pacific markets with established frameworks – including the Global Reporting Initiative, the Sustainability Accounting Standards Board standards and the Taskforce on Climate-related Financial Disclosures recommendations.

“The CSRD reporting requirements apply initially to subsidiaries of non-EU companies and, from fiscal year 2028, to parent organizations with turnover in the EU above specific thresholds,” the study notes. “From fiscal year 2024 (now 2026), large subsidiaries of non-EU companies, including many Asian-Pacific companies, will be required to disclose sustainability matters under the CSRD.” The 2028 date has not been changed under the new directive.

But, seeking to achieve efficiency and consistency in sustainability reporting, the study points out, some companies are choosing to prepare for voluntary disclosures under the EU rules ahead of the date for mandatory disclosure by non-EU parent companies in fiscal year 2028.

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