In connection with the Corporate Sustainability Reporting Directive Omnibus proposals, the European Commission indicated it will trim and make other changes to the European Sustainability Reporting Standards requirements. The Commission has indicated that it intends to adopt “without delay” a delegated act to revise the first set of ESRS, and in any event within six months after the entry into force of the proposed “content” directive. For a detailed discussion of the Omnibus proposals, see this Ropes & Gray post.
The Commission plans to simplify and streamline the ESRS and provide clarity and legal certainty to undertakings. According to the Commission, the revision of the delegated act adopting the ESRS will substantially reduce the number of mandatory ESRS datapoints by:
- Removing those deemed least important for general purpose sustainability reporting;
- Prioritizing quantitative datapoints over narrative text; and
- Further distinguishing between mandatory and voluntary datapoints, without undermining interoperability with global reporting standards and without prejudice to the materiality assessment of each undertaking.
The revision also is intended to improve consistency with other pieces of EU legislation and provide clearer instructions on how to apply the materiality principle, ensure that undertakings only report material information and reduce the risk that assurance service providers inadvertently encourage undertakings to report information that is not necessary or dedicate excessive resources to the materiality assessment process. The revision also is intended to simplify the structure and presentation of the ESRS.
In late March, EFRAG received a specific mandate from the European Commission to provide technical advice for the adoption of a delegated act to revise and simplify the existing ESRS. EFRAG is expected to deliver its technical advice by the end of October.
As part of that process, EFRAG has launched a public consultation on potential ESRS revisions. EFRAG is seeking input on the following:
- ESRS mandatory datapoints that are least important or problematic for general-purpose sustainability reporting.
- How to modify ESRS provisions that are unclear.
- How to improve consistency with other EU legislation.
- How to improve ESRS provisions on materiality to ensure that undertakings report only material information, do not report unnecessary information and do not dedicate excessive resources to the materiality assessment process.
- How to simplify the structure and presentation of the standards.
- How to further enhance interoperability with global sustainability reporting standards.
- Any other modifications that could simplify the ESRS without compromising their role in supporting the EU Green Deal.
EFRAG’s public consultation is open until May 6. The online questionnaire is available here.
Key takeaway: There is a short window for submission. Companies that wish to submit feedback – either directly or through trade associations – will want to turn to this quickly.
