On Monday 4 September, members of the European Parliament’s Committee on Economic and Monetary Affairs (ECON) discussed financial and extra-financial accounting standards with the chairs of the international standards boards. MEPs were concerned about the risk of over-regulation by the EU in relation to the rest of the world, and the risk of an excessive administrative burden.
Dorien Rookmaker (ECR, Dutch) surveyed the chairs on over-regulation, identified by the Federation of European Risk Management Associations (FERMA) as one of the main risks for companies.
Emmanuel Faber, Chairman of the International Sustainability Standards Board (ISSB), replied that the risk lay more in under-regulation. “Under-regulation does not concern the EU, but the risk is that the EU will be left alone, or too alone”, he explained. “Indeed, even if, from a political point of view, over-regulation is to be feared, under-regulation is perceived everywhere as a risk by the market itself. There is a very broad demand to say that climate is a risk that is not included in the accounts”, he added.
In his view, if we establish a link between financial risks and climate risks, transparency on these risks will become apparent at company level. “There is always a risk of being too transparent, but transparency about these risks is absolutely necessary at company level, because we want to build resilient economies”, he stressed.
Similarly, according to Andreas Barckow, Chairman of the International Accounting Standards Board (IASB), the number of standards should not be reduced because, while this may reduce the administrative burden, it would also remove helpful guidance for boards or stakeholders. However, Germany recently proposed a plan to reduce administrative burdens at European level (see EUROPE 13239/15).
According to Erkki Liikanen, Chairman of the Trustees of the IFRS Foundation, over-regulation is a problem for companies when they have to carry out double reporting, which represents a cost for them. “This year, more efforts have been made to achieve greater alignment, but we need alignment to make this possible, and not just tools” he said.
Markus Ferber (EPP, German) also asked to what extent the European Sustainability Reporting Standards (ESRS) for extra-financial reporting by companies deviate from international rules.
Mr Faber was reassuring: “We have achieved a very high level of alignment on the substance of the climate standards”. He indicated that apart from the central part, which is common in substance, some elements are required by the ISSB, and not yet by the ESRS, and vice versa.
“The list [of divergent points] is very clear for companies to navigate from international to ESRS or from ESRS to ISSB. The navigation tool is still being finalised, but it is perfectly navigable”, he said.
The delegated acts relating to the ESRS still need to be approved by the European co-legislators (see EUROPE 13234/16). (Original version in French by Anne Damiani)