Thomson Reuters and SAP: Empowering businesses with advanced ESG reporting tools for EU standards

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In response to the growing demand for transparency and accountability in environmental, social, and governance (ESG) practices, the European Commission has established a new regulatory framework through the Corporate Sustainability Reporting Directive (CSRD). This directive mandates that companies annually report their ESG data, for financial years starting on or after January 1, 2024.

To meet these rigorous requirements, Thomson Reuters and SAP have teamed up to create a robust reporting solution. By combining the power of ONESOURCE Statutory Reporting with SAP’s Sustainability Control Tower, this partnership equips corporate sustainability officers with the tools they need to efficiently gather, manage, and file their ESG data, ensuring compliance with the European Sustainability Reporting Standards (ESRS) and driving transparency in corporate reporting.

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Simplifying ESG reporting compliance through technology and partnerships

Technology plays a crucial role in enabling companies to comply with the new ESRS requirements. To help corporations adhere to these standards, Thomson Reuters and SAP have collaborated to develop a new comprehensive solution.

The ONESOURCE Statutory Reporting with SAP’s Sustainability Control Tower, set to launch later this year, will centralize the collection and management of all ESG measures and metrics. It is designed to assist corporations in maintaining compliance with regulatory directives and helps reduce risk by optimizing the process of ESG data collection, management, and reporting.

Companies will be required to use a digital XBRL taxonomy to tag (markup) their disclosures in ESRS reporting, ensuring an electronic reporting format. With our built-in tagging, the necessity for outsourced iXBRL tagging is removed, streamlining the ESRS reporting process. Additionally, this integration offers seamless access to integrated ESG data, enhancing productivity, and providing a comprehensive and efficient solution for meeting CSRD requirements.

Our latest ESG reporting solution is tailored specifically for those operating within the European Union or the UK. This integration helps address some of the critical challenges faced by individuals managing ESG reporting in large multinational companies. It facilitates the collection of both financial and non-financial data from various parts of the organization, allowing for centralized storage and efficient reporting.

A solution designed to meet ESRS requirements can be better appreciated for its capacity to address the complexities and demands if we go back and review the standards’ history. This helps us understand whom these standards will impact, what these new requirements will entail, and acknowledges the crucial role of technology in compliance.

The development of the European Sustainability Reporting Standards (ESRS) 

The European Union (EU) has a long history of environmental awareness and sustainability initiatives that predate the specific development of the ESRS. This journey began in the 1970s with the launch of the first Environmental Action Programme in 1973. See the ESRS’ progressive timeline below:

• 1973: The launch of the first Environmental Action Programme laid the groundwork for fundamental environmental regulations and institutions.
• 2014: Adoption of the Non-Financial Reporting Directive (NFRD) required large public-interest companies to disclose information on social and environmental impacts.
• 2018: Introduction of the Action Plan on Financing Sustainable Growth aimed to redirect capital towards sustainable investments and manage financial risks related to climate change and other environmental issues.
• 2019: The presentation of the European Green Deal set an ambitious goal for Europe to become the first climate-neutral continent by 2050.
• 2020: The proposal of the Corporate Sustainability Reporting Directive (CSRD) aimed to enhance and standardize sustainability reporting across the EU.
• 2021: The formal adoption of the CSRD proposal marked the introduction of the European Sustainability Reporting Standards (ESRS).
• 2022: The final CSRD was published in the Official Journal of the European Union on December 16, 2022.
• 2024: The European Union’s ESRS took effect for financial years starting on or after January 1, 2024.

The development and finalization of the ESRS by the European Financial Reporting Advisory Group (EFRAG) involved extensive stakeholder engagement to ensure robustness and practicality. These standards are designed to redefine corporate accountability across the EU, by establishing a clear framework for reporting the environmental and societal impacts of business activities.

This initiative addresses the demand for uniformity in sustainability reporting, ensuring that stakeholders—including investors, customers, and regulators—have access to reliable and comparable data for informed decision-making.

Double materiality and increased granularity 

A groundbreaking feature of the ESRS is the concept of double materiality, which requires companies to report not only on how their operations affect the environment and society, but also on how these external factors impact their financial performance. This dual perspective provides a holistic view of sustainability, highlighting the intrinsic link between business health, the health of our planet, and its people.

Companies must provide detailed disclosures on governance, strategy, impact management, risk and opportunity management, and sustainability metrics and targets. This increased granularity presents a significant challenge, requiring robust systems and processes for data collection, management, and disclosure.

Which companies must comply with ESRS reporting? 

The scope of the ESRS is broad, encompassing all large and most listed EU companies, including large subsidiaries of non-EU parents. Specifically, non-EU companies generating more than EUR 150 million in net turnover within the EU will also fall under these regulations.

As of January 1, 2024, under the CSRD, large companies with more than 500 employees, including EU public interest entities and non-EU firms with listed securities on EU markets, are now required to comply with ESRS reporting requirements.

Other large companies will need to begin reporting January 1, 2025, while listed small and medium-sized enterprises (SMEs) will follow January 1, 2026. Non-EU companies with significant EU operations—those with a net turnover exceeding EUR 150 million and substantial subsidiaries or branches with a turnover over EUR 40 million—will be required to report starting January 1, 2028.

A large company is defined as meeting at least two of the following criteria: over 250 employees, over EUR 40 million in net revenue, or over EUR 20 million in total assets. From 2028, non-EU parent companies with significant EU activities will also need to adhere to global reporting standards tailored specifically for non-EU entities.

A sustainable future with ESG reporting solutions 

The introduction of the ESRS marks a significant shift in corporate sustainability reporting. When embracing these standards, companies not only comply with current regulations, but also contribute to a more sustainable and transparent global economy. As challenging as this transition might be, it is a crucial step towards a sustainable future, reinforcing the idea that business success and environmental stewardship can go hand in hand.

By opting for the integrated solution from Thomson Reuters and SAP, you are not only investing in a reporting tool – you are enabling your organization to excel in sustainability and corporate responsibility, all while optimizing your ESG processes. This technology will allow your organization to embrace the future of ESG reporting today.

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