ECG responds to EC call for feedback on the first set of European sustainability reporting standards (ESRS) draft delegated regulation
The ECG has provided feedback on the EC’s draft delegated regulation on the first set of European sustainability reporting standards (ESRS) as required under the Corporate Sustainability Reporting Directive (CSRD). The ECG welcomes significant changes in the EC’s draft ESRS that increase focus on providing decision-useful information, and for smaller companies in particular, give more time to set up the processes, systems, and internal controls needed to deliver high-quality data. The ECG believes that the following main recommendations will further contribute to the successful deployment of ESRS in the EU and around the world:
(1) There should be interoperability between ESRS and ISSB standards to promote global comparability and reduce additional reporting burden. In particular, the lack of alignment on the definition of financial materiality between ESRS and IFRS Sustainability Disclosures Standards is a critical issue that needs to be addressed;
(2) Articulation of the materiality approach should be further clarified;
(3) Additional guidance and educational material from EFRAG addressing, amongst others, the materiality assessment process, value chain, anticipated financial effects is needed;
(4) Disclosure requirements for entities benefitting from phase-in measures (ESRS 2 paragraph 17) should be clarified;
(5) Other pieces of EU legislation, such as the Sustainable Finance Disclosures Regulation (SFDR), will need to be reviewed to ensure interoperability; and
(6) Robust due process is needed to ensure the quality of standards.