The European Commission adopted, on Monday 31 July, a draft delegated act concerning the European Sustainability Reporting Standards (ESRS) for corporate non-financial reporting (see EUROPE 13233/12). Initially developed by the European Financial Reporting Advisory Group (EFRAG), the ESRS have been modified by the European Commission.
The ESRS are less detailed than they were at the outset, as a result of Commission President Ursula von der Leyen’s request in March to simplify reporting (see EUROPE 13154/16, 13161/17). As a result, the current project has reduced the number of disclosure requirements by 40% and the number of individual data points by about 50%.
According to the Commission, this reduction will result in a total cost reduction of €1,172 million over the phasing-in period. By making the reporting of certain information optional, it also estimated that costs will be reduced by €230 million per year compared to EFRAG’s initial proposal.
The Commission is putting in place an interpretation mechanism to provide formal interpretation of the standards. It also asked EFRAG to publish additional guidance and educational material, addressing the materiality assessment process and other issues (see EUROPE 13156/25).
The Commission wanted as well to strengthen interoperability between the ESRS and global standards currently being developed by the International Sustainability Standards Board (ISSB). “In order to guarantee proportionality and facilitate the correct application of standards by businesses, the Commission has made changes [...] to ensure consistency with the EU legal framework and a high degree of interoperability with the Global Reporting Initiative, as well as editorial changes”, the text states.
Following publication of the delegated act, the ISSB issued a press release: “The European Commission, EFRAG and ISSB have worked jointly to improve the interoperability of their respective climate-related disclosure requirements in the overlapping climate disclosure standards”. It adds that “this work has successfully led to a very high degree of alignment, reduced complexity and duplication for entities wishing to apply both the ISSB Standards and ESRS”. To help these entities, guidance documents on interoperability will be published.
However, Better Finance, the European Federation of Investors and Financial Services Users, issued a number of critical comments in a press release on Monday 7 August. “The delegated act does not provide reliable and comparable data on sustainable development, which raises fears about greenwashing, as companies could minimise their impact on the environment”, it warned. It highlighted the inconsistency between the different levels of requirements for different topics, in particular the consideration given to climate versus biodiversity.
The delegated act must be approved by the European Parliament and the EU Council before it can be applied from 1 January 2024.
To read the delegated act: https://aeur.eu/f/8bw (Original version in French by Anne Damiani)