BITCI Quarterly Sustainability Reporting Update – September 2024
In 2023, the Corporate Sustainability Reporting Directive (CSRD) entered into force and a first set of European Sustainability Reporting Standards (ESRS) was adopted by way of delegated act.
While the first companies are expected to comply from 2024, EU Member States have now transposed the CSRD into their national law and Efrag, the independent technical advisory group mandated by the European Commission, continues to work on reporting standards and guidance to help businesses embed the requirements.
In this Quarterly Sustainability Reporting Update, BITCI highlights resources and outline the most recent developments related to the CSRD and the sustainability reporting landscape.
New resources
Interpretation of the CSRD – FAQ
The European Commission has recently issued a draft notice aimed at clarifying the interpretation of the CSRD and the provisions introduced in various European directives to support the implementation of the CSRD. The frequently asked questions cover issues such as scope, exemptions, digitalisation as well as what constitutes a reasonable effort in collecting value chain information or what should the assurance provider express an opinion on.
Implementation of the CSRD and ESRS – Case studies
Efrag conducted a study among 28 large EU-headquartered companies to get insight into the implementation of ESRS. This document synthetises and illustrates emerging practices and challenges related to 4 main areas: Double materiality assessment, Datapoints, Value chain, and ESG reporting organisational approach.
Although the observed practices should not be considered representative of the overall market or as an indication of EFRAG’s opinion on the level of compliance with ESRS, they provide an interesting insight into the interpretation and the direction taken by some larger companies ‘chosen due to their higher level of maturity and greater resources at their disposal as they make their journey towards ESRS implementation’.
EFRAG – Implementation of ESRS: Initial Observed Practices from Selected Companies – July 2024
The We Mean Business Coalition studied the 2023 annual reports of 30 companies that began embedding CSRD requirements, recognising the value in adhering to these emerging norms and preparing for compliance. They compiled examples in a report covering topics from identifying impacts, risks and opportunities (IROs) to the process and outcome of the double materiality assessment (DMA), or internal controls.
We mean business – Early adopters’ CSRD reporting – July 2024
Corporate Sustainability Reporting Directive (CSRD)
Ireland’s transposition
The CSRD was transposed into Irish law on 5 July 2024 and came into effect on 6 July 2024, bringing new corporate sustainability reporting rules into Ireland’s accounting and audit frameworks.
In parallel, the public consultation on the member state option to recognise, accredit, regulate and monitor independent assurance services providers (IASPs) is now closed.
Irish Statute Book – EU Corporate Sustainability Reporting Regulations 2024
Matheson provides a digest of the requirements of Irish law and clarifications on the scope of the CSRD in Ireland, consolidation rules, report publication rules, non-compliance and penalties, …
European Sustainability Reporting Standards (ESRS)
Implementation guidance
In addition to the existing implementation guidance documents on Materiality Assessment, Value Chain and the ESRS Datapoints List, 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.
Efrag – ESRS implementation guidance documents – Final versions May 2024
In July 2024, Efrag released a new compilation of 93 explanations – including 23 new – to questions submitted on their Q&A Platform. Efrag’s Q&A platform allows preparers to ask technical questions about ESRS implementation.
Efrag – Compilation of technical explanations – Q&A Platform – July 2024
Sector-specific ESRS
Although their adoption is scheduled for June 2026, sector-specific standards will be made public as soon as they are available before that date. Efrag has established advisory panels and sector communities to work on high impact sectors and financial institutions.
The exposure drafts for the Oil and Gas sector and the Mining, Quarrying and Coal Mining sector are currently at the last phase before public consultation in Q4 2024. Drafts for the Road Transport and Textiles, Accessories, Footwear and Jewellery sectors are being reviewed by the Efrag Sustainability Reporting Board and Technical Expert Group. And five other standards are at an early draft and research phase: Financial Institutions / Agriculture, Farming and Fishing / Motor vehicles / Energy Production and Utilities / Food and Beverage.
Sector Classification (ESRS SEC 1) will be put out for consultation later this year. It is based on NACE classification with additional mapping to other categorisations to accommodate industry-specific activities and sustainability criteria.
SME standards
Efrag is working on the revised and significantly streamlined versions of the two SME standards – LSME for listed SMEs and the voluntary VSME standard for SMEs outside the scope of the CSRD – following the completion of field tests and a first public consultation phase on exposure drafts in the second quarter of 2024. In September, an online workshop is organised to discuss whether the revised LSME still meets the needs of investors and users.
Revised versions are expected in December 2024. The LSME ESRS will be effective from FY 2026 with an optional 2-year opt out, and will be adopted as a delegated act by the European Commission.
Efrag – Revised LSME Workshop for users and investors
Interoperability – TNFD
After signing a cooperation agreement in December 2023 to further advance nature-related disclosure, Efrag and the Taskforce on Nature-related Financial Disclosure (TNFD) published a correspondence mapping, highlighting that all TNFD recommended disclosures are reflected in the ESRS.
ESRS x TNFD – Correspondence Mapping – June 2024
Digitalisation
On 30th August, Efrag publishes the final version of the XBRL taxonomy for the first set of ESRS. The pack of documents includes an explanatory note, illustrative examples of XBRL reports and the taxonomy illustrated in excel. It has been handed over to the European Securities and Market Authority (ESMA) to develop Regulatory Technical Standards (RTS) for tagging the ESRS sustainability statement before the European Commission (EC) can adopt the tagging rules by way of a delegated act.
