ESBG submitted its response to the European Financial Reporting Advisory Group (EFRAG) public consultation on the first set of Draft EU Sustainability Reporting Standards (ESRSs) on 4 August. The consultation comes in response the European Commission’s proposal for a Corporate Sustainability Reporting Directive (CSRD) which envisages the adoption of EU Sustainability Reporting Standards (ESRSs). As part of this, the Commission mandated EFRAG to provide technical advice in the form of draft sustainability reporting standards.
In its response, ESBG highlighted the need for consistency between the International Sustainability Standards (ISSB) sustainability disclosures and the EFRAG ESRSs in order to ensure a levelled global playing field. Moreover, ESBG emphasises the lack of proportionality with respect to disclosure requirements, specifically for smaller/unlisted companies and proposes the provision of certain reporting requirements being made optional.
With respect to implementation challenges, ESBG considers that the data availability issue is the most critical challenge for financial institutions. Taking into consideration the above, ESBG proposed two phase-in solutions that are mutually complementary: i) first year reporting on own operations and gradual reporting on information from the value chain and ii) prioritisation of climate topics and gradual consideration of other environmental, social and governance topics.
Furthermore, we believe that there is not enough guidance in the exposure drafts with respect to the application of the double materiality principle (the requirements for companies to disclose not only the risks that affect, but also their impacts on society and on the environment). In this sense, this concept needs to be clarified and more guidance is needed in relation to specific sectors in due time.
ESBG stresses the limitation on disclosing value chain information for companies. We consider it is difficult to obtain information from companies that are not under the control of the institution (e.g. associate companies). We propose that a phase-in period of 2 years must be granted to financial undertakings to allow them to adapt their processes to collect the necessary information from their value chain.
As a next step, ESBG will evaluate if there is interest from members in submitting input into the up-coming EFRAG consultations on SME specific standards as well as on sector specific standards (EFRAG consultations are expected to be published in 2023).
