Following the agreement between the European Parliament and the Council of the EU on the CSRD directive governing corporate sustainability reporting (see EUROPE 12983/34), it is now up to the European Financial Reporting Advisory Group (EFRAG) to set the standards for this reporting. EUROPE took stock of EFRAG’s work with Jean-Paul Gauzès, whose term as EFRAG Board President has just ended. (Interview in French by Anne Damiani)
Agence Europe - First of all, Mr Gauzès, are you satisfied with the agreement that has been reached?
Jean-Paul Gauzès - Yes, we are happy with this agreement, which is balanced and which will enable us to have a happy situation in Europe compared with what is happening in other jurisdictions. It has been a big job, I think everyone has to make an effort, especially the companies. I know that they have some concerns, that it is too complex, that it creates obstacles to competitiveness and that it is not international enough.
I believe that these concerns will gradually be allayed when we see that the work is done in a very pragmatic way. What is remarkable is that Europe is the jurisdiction in which the regulatory requirements for sustainability are the most important. This explains the need for European standards. These are not intended to be universal; they are intended to enable companies to meet European regulatory requirements.
How to ensure the compatibility of European standards with international standards set by the International Sustainability Standards Board (ISSB)?
The directive expressly provides for the alignment and compatibility of European and international standards. To do this, I think there has to be an effort on both sides.
That is to say, an effort of reflection on the European side to take into account what would be determined at international level, in particular by the ISSB. This also assumes that the ISSB is willing to cooperate to ensure that their general principles are compatible with European rules.
This is what Patrick de Cambourg (Chair of the Task Force on European reporting standards on sustainable development, editor's note) calls ‘co-construction’. I prefer the term ‘compatibility’, because ‘co-construction’ would, in my opinion, imply a much greater degree of integration.
What does EFRAG have to do now?
The directive establishes EFRAG’s role as an advisor to the European Commission in writing draft standards. The directive also defines what these standards should be. EFRAG has to work within an imposed framework.
The European Commission presented the Directive to EFRAG last week and set out its requirements. This shows that EFRAG is a collaborator of the Commission and not an authority in itself. The task force, which existed prior to the directive, has presented drafts which are currently out for public consultation until Monday 8 August.
The EFRAG bodies, the Board (Sustainability Reporting Board, editor’s note) and the TEG (Sustainability Reporting Technical Expert Group, editor’s note), will review the drafts and modify them in the light of the consultation. The aim is to be able to give the Commission the first draft standards by mid-November.
It’s very tight, but it's possible, because a lot of work has been done.
What is at stake now?
The challenge is to see if this work will be validated by the public consultation. There is no denying that some people in this field would like to adopt the ISSB standards outright.
The idea is not to adopt an endorsement system like for financial standards, where standards are set by an external body and Europe simply adopts them. This is not foreseen, because we have a specificity of the European regulation on sustainability. Standards must be set for companies to comply with these rules.