BITCI Quarterly Sustainability Reporting Update – June 2024

BITCI Quarterly Sustainability Reporting Update – June 2024

In 2023, the Corporate Sustainability Reporting Directive (CSRD) entered into force and a first set of cross-sector European Sustainability Reporting Standards (ESRS) was adopted. 

As first companies are in scope for CSRD compliance from 2024, EFRAG – the independent technical advisory group mandated by the European Commission – continues to develop technical standards and implementation guidance to help businesses embed the requirements. 

In this quarterly ‘Sustainability Reporting Update’, BITCI outline the most recent developments related to the CSRD and the sustainability reporting landscape, including the following categories: 

  • New resources & CSRD digests 
  • European Sustainability Reporting Standards (implementation guidance, sector-specific standards, extra-territoriality standards, SMEs standards) 
  • Digitalisation 
  • Interoperability 
  • Updates EU Member States  
  • Updates Non-EU Jurisdictions 

For more information, contact Neela Couture, Sustainability Adviser, ncouture@bitc.ie  

New resources & CSRD digests 

European Sustainability Reporting Standards (ESRS)

Implementation guidance

  • Efrag recently issued the final versions of 3 implementation guidance documents. 

– Materiality Assessment implementation guidance describes the ESRS approach to materiality, illustrates how the assessment is performed and contains answers to frequently asked questions for practical guidance.  

– Value Chain implementation guidance covers how to navigate value chain requirements in the ESRS and contains an upstream and downstream value chain map and answers to frequently asked questions for practical guidance.  

– ESRS Datapoints List and accompanying explanatory note present the complete list of all disclosure requirements in sector-agnostic ESRS in an Excel format. 

  • In addition to the existing guidance documents, Efrag is in the process of preparing a Transition Plan implementation guidance to support companies in efficiently structuring and disclosing their transition plans in accordance with the adopted standards. 
  • Finally, Efrag launched a Q&A platform to ask technical questions about the ESRS implementation. In May 2024, a compilation of technical explanations was released, it contains a total of 68 explanations to help you navigate ESRS implementation and other ESRS topics. 

Sector-specific & Extra-territoriality standards

  • A 2-year delay for the adoption of the sector-specific standards and the extra-territoriality standards (non-EU companies) has received final approval from EU institutions. These ESRS will be adopted in June 2026, instead of June 2024, but will be made public as soon as they are available before the 2026 deadline.  

Note: This doesn’t affect the compliance timeline for non-EU businesses, which remains FY 2028. 

  • Development of sector-specific ESRS is underway. Efrag is developing its Sector Classification (ESRS SEC 1) based on NACE classification, which will be put out for consultation later this year. Sector advisory panels and communities have been set up to develop draft standards for some core sectors: Mining, Quarrying and Coal / Oil and Gas / Road Transportation / Agriculture, Farming and Fisheries / Textiles, Accessories, Jewellery and Footwear. 

SMEs standards 

  • The public consultation and field tests on the Draft ESRS for listed SMEs (LSME) and Draft voluntary ESRS for non-listed SMEs (VSME) came to an end on May 21st. A series of educational videos are available.  
  • The LSME ESRS is applicable from FY 2026 with optional 2-year opt out, for EU and non-EU SMEs listed in the EU. 
  • The VSME ESRS aims to capture – and replace – all sustainability-related information SMEs are asked to provide to their clients via sustainability questionnaires. 

Digitalisation

  • Efrag and XBRL Europe work on the development of digital taxonomies that will enable the ‘tagging’ of sustainability reporting in machine-readable XBRL format. This electronic reporting format is already implemented for the financial statements of financial institutions in the EU since 2021 with the European Single Electronic Format (ESEF) regulation. Electronic format for sustainability reporting is likely to be applicable from FY 2026 – to be confirmed. 
  • The public consultation on the Draft XBRL Taxonomy for ESRS came to an end on April 8th. The final XBRL taxonomy is expected to be handed over during summer 2024 to the European Commission and the European Securities and Market Authority (ESMA), to be adopted by way of a delegated act amending the ESEF regulation by the end of 2024.  

Interoperability

  • An ESRS-GRI interoperability index has been approved and a digital correspondence table to achieve digital interoperability between ESRS and GRI standards is in preparation. 
  • Efrag and the IFRS Foundation have published an interoperability guidance to illustrate the high level of alignment achieved between ESRS and ISSB standards, and how a company can apply both sets of standards without duplicating reporting efforts.  

Note: IFRS have published 2 standards to date – ISSB 1 on general requirements / risks and opportunities, and ISSB 2 on climate-related disclosures – which are interconnected with ESRS 1, ESRS 2 and ESRS E1. An ISSB digital taxonomy has been issued, it is likely that both organisations will look for alignment and interoperability of their digital taxonomies. 

  • Efrag and the Taskforce for Nature-related Financial Disclosures (TNFD) signed a cooperation agreement. An ESRS-TNFD correspondence table is in preparation and future collaboration is expected in the development of sector-specific ESRS. 

Updates – EU Member States

Ireland 

  • The Department of Enterprise, Trade and Employment (DETE) work continues to ensure that the necessary requirements of the CSRD will be transposed into national law by the deadline of July 6th 2024. 
  • A public consultation on the member state option to recognise, accredit, regulate and monitor independent assurance services providers (IASPs) has recently been launched. The deadline for submissions is July 19th. 

France 

Support to Member States 

  • The Technical Support Instrument (TSI) is an EU programme that provides tailor-made technical expertise to EU Member States to design and implement reforms. DG Reform is currently reaching a maximum of national authorities and hosted an information session on May 27th. 
  • On sustainability reporting, the TSI will support member states to enhance companies’ capacity to implement sustainability reporting and enhance the usability of the framework, via diagnosis measures, implementation measures and capacity building measures. 

Updates – Non-EU Jurisdictions

  • The Stock Exchange of Hong Kong (HKEX) is among the world’s first exchanges to enhance climate-related disclosure requirements based on IFRS standards ISSB S2 – set to commence in 2025. 
  • Non-EU jurisdictions are scrambling to determine which regime they will apply, based on market structure and their focus areas (ESRS, ISSB, double materiality, financial materiality). 
  • South Korea, Brazil, Japan and Canada, are currently inviting public feedback on proposed sustainability disclosure requirements. Other jurisdictions like India, Singapore and Malaysia have recently concluded similar consultations.  
  • Both ISSB – with climate-only standards for now – and ESRS/GRI are being considered. 
  • In terms of scope, the appetite remains restricted to listed companies only, and not generally large companies as for the CSRD in the EU.