EFRAG was tasked by Mairead McGuinness, European Commissioner for Financial Services, Financial Stability and Capital Markets Union in May 2021 to start the technical development of draft standards in parallel to the legislative process of the Corporate Sustainability Reporting Directive (CSRD).

The EFRAG Project Task Force on European sustainability reporting standards transmitted its proposed public consultation package including the first set of exposure drafts (EDs) to the EFRAG Sustainability Reporting Board on 27 April 2022. Now EFRAG’s public consultation on the draft European Sustainability Reporting Standards (ESRS) Exposure Drafts will run until 8 August 2022.

The EDs correspond to the first set of standards required under proposed CSRD and cover environmental, social and governance matters. The set also includes cross-cutting standards. EFRAG is seeking views from constituents on three key aspects of the EDs: notably, overall substance of the EDs, the possible options for prioritising/phasing in the implementation of the ESRS and feedback on the adequacy of each disclosure requirement mandated by each ED. 

Nigel Sleigh-Johnson, ICAEW’s Director of Audit and Corporate Reporting, said: “These are exciting times for those seeking a step change in the reporting of climate risk and other sustainability-related matters. EFRAG has made tremendous progress in developing draft sustainability standards for use in the EU. In considering these proposals, a particular focus for ICAEW will be the importance of alignment between the various initiatives around the world in sustainability reporting, with global comparability and reporting efficiency in mind.” 

European umbrella accountancy body Accountancy Europe has also stressed the importance of ensuring that corporate reporting supports the necessary transformation towards a sustainable economy, while raising some concerns that ESRS disclosure requirements might not help to meet the EU’s Green Deal ambitions

In a letter to Commissioner McGuinness on European sustainability reporting standards, Accountancy Europe noted that initial working papers from the task force charged with drafting the EDs appeared prescriptive, including hundreds of datapoints. 

“To be effective, reporting needs to capture information measuring what really matters. It will then enable the transition to circular and sustainable business models, and direct investment towards sustainable businesses,” the letter says. “For this to happen, standards need to be easy to understand and apply. Too complex or burdensome reporting systems risk generating unhelpful pushback and slowing down adoption.” 

Stressing the importance of global alignment, Accountancy Europe observed that use of different terminology, definitions and concepts and differing objectives could impair convergence with reporting requirements being thrashed out by the International Sustainability Standards Board (ISSB).