Sustainability

EFRAG releases proposals for its draft EU Sustainability Reporting Standards

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By:
Sarah Carroll
18 May 20222 min read
The European Commission has proposed a Corporate Sustainability Reporting Directive (CSRD) and as part of this will adopt EU Sustainability Reporting Standards (ESRS). The European Financial Reporting Advisory Group (EFRAG) has been asked to provide technical advice to the European Commission in the form of fully drafted sustainability reporting standards.

The Project Task Force on European Sustainability Reporting Standards (PTF-ESRS) has had the sole responsibility of preparing draft ESRS and EFRAG has now launched these EDs for public consultation.

These EDs will represent the first set of standards required under the CSRD proposal and cover the full range of sustainability matters, which are environment, social, governance and cross-cutting standards.

EFRAG is seeking feedback on:

  • The overall ESRS architecture, content and substance, and specifically:
    • on the practicality and efficiency of the proposed approach to materiality
    • whether the ESRS and the proposed disclosure requirements do promote relevant, verifiable, understandable, comparable information and ultimately are adequate to support the production of faithful information
    • whether the ESRS and the proposed disclosure requirements do strike the right balance between relevance, feasibility, preparation costs and decision-usefulness
    • the completeness of the ESRS, in terms of datapoints and of disclosure requirements, per each sustainability topics / subtopics, and
  • The implementation prioritisation/phasing-in opportunities and options to ensure the ESRS strike the right balance between covering all CSRD requirements and stakeholders’ expectations, paying particular attention to sustainable finance related needs, while achieving a reasonably ambitious enhancement of current reporting practices.

Closing date for submissions

Exposure drafts (EDs)

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The EDs issued for public consultation are as follows:

  • ESRS 1 - General principles

  • ESRS 2 - General, strategy, governance and materiality assessment

  • ESRS E1 - Climate change

  • ESRS E2- Pollution

  • ESRS E3 - Water and marine resources

  • ESRS E4 - Biodiversity

  • ESRS E5 - Resource use and circular economy

  • ESRS S1 - Own workforce

  • ESRS S2 - Workers in the value chain

  • ESRS S3 - Affected communities

  • ESRS S4 - Consumers and end users

  • ESRS G1 - Go vernance , risk management and internal control

  • ESRS G2 - Business conduct

The closing date for submissions to EFRAG is 8 August 2022, so we recommend that a prompt start to evaluating the EDs and their potential impact as they are currently drafted.

Our thoughts

We welcome the release of these proposed sustainability reporting standards because they will enable European preparers that are captured by the CRSD to provide sustainability disclosures that should meet the information of a wide number of stakeholders. These EDs are intended to build on and be compatible with those issued by the ISSB, which should reduce the amount of effort needed to comply with both sets of standards. Grant Thornton will be reviewing these EDs and providing written comments back to EFRAG for its consideration by the due date.

If you would like to discuss any of the points raised, please speak to your usual Grant Thornton contact or your local member firm.

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Authors
  • Sarah Carroll
    Sarah Carroll Sarah is a director of the global corporate reporting team specialising in promoting both sustainability reporting and the consistent application of International Financial Reporting Standards (IFRS). View Profile