Accountancy Europe and WBA joint expert meeting on sustainability reporting standards

Online Debate

Accountancy Europe and WBA joint expert meeting on sustainability reporting standards

Accountancy Europe and World Benchmarking Alliance will hold an expert meeting discuss the EU sustainability reporting standards.

Together with other experts, we will cover the key issues around what the ESRS can bring to the table, their interaction with EU policy objectives and processes, as well as wider international cooperation. Join us to exchange on the great possibilities the ESRS can bring to finding constructive solutions in the sustainability reporting space.

Please contact [email protected] should you be interested in the event.

** This event is by invitation only **


On 21 October, Accountancy Europe and the World Benchmarking Alliance (WBA) held an expert meeting on the Corporate Sustainability Reporting Directive (CSRD) under the Chatham House rule. The meeting welcomed experts from all stakeholder groups and covered key issues around what the European Sustainability Reporting Standards (ESRS) can bring to the table, their interaction with EU policy objectives and processes, as well as wider international cooperation. Below we highlight the main considerations of this meeting.

Session 1 -  What can European Sustainability Reporting Standards (ESRS) bring to the table and how should they interact with EU policy processes and objectives?

There is a lack of coherent and consistent sustainability information disclosed by companies. The EU published the sustainable finance package in April 2021 – a set of policy initiatives and tools contributing to the EU Green Deal and Sustainable Finance agenda, including the CSRD. The CSRD proposal attempts to put sustainability reporting on an equal footing with financial reporting and make it more comparable, accessible and usable for all stakeholders. When companies report under the future CSRD, they will need to use a set of new sustainability reporting standards being developed by the European Financial Reporting Advisory Group (EFRAG). Europe’s corporate sustainability reporting standards are crucial to close the gaps and ensure that data is comparable and consistent.

Stakeholders expect standards to be consistent and harmonised with other policy initiatives, with a clear and common reference to sustainable finance and investments. A double materiality approach should be prioritised as it is highly important for different stakeholders – from investors to civil society.  It is important for the EU standards initiative to have a certain level of independence from IFRS Foundation standards that are not aligned with the double materiality approach in order to achieve EU policy objectives. Stakeholders understand that full standardisation is not achievable on a global scale. That being said, a minimum degree of global convergence is needed, interoperability is needed in the standards, to align as much with global developments as possible. Some expressed the support for standards review every three years.

While the ESRS development is to be applauded, their success will depend on their ability to spur company action beyond disclosures. Forward looking information, for example on how targets and investments are made to implement transition plans, should also be among the required disclosures. The need for such information is an argument for ensuring that due diligence action requirements are implemented as soon as possible, and to not wait on disclosure requirements to be perfect.

Session 2 – EU and international cooperation

European and international developments on sustainability reporting standards are happening in parallel. EFRAG is developing the ESRS to meet the public policy ambitions. The International Financial Reporting Standards (IFRS) Foundation is working on the creation of a new standard-setting Board – the International Sustainability Standards Board (ISSB). The ISSB aims to deliver a global baseline of sustainability-related disclosure standards to meet investors and other capital market participants’ needs for decision-useful sustainability information.

While there is an ongoing communication among the different initiatives, a key question remains on how to make the cooperation between the EU and international dimensions work best to achieve a coherent corporate reporting regime. In addition, speakers noted that sustainability reporting, as financial reporting, must be mandated and audited, with the same level of rigour in order to prevent greenwashing.

The direction of travel is clear, nevertheless, it is still challenging to make the initiatives sync. The timeline and deadlines set are not necessarily the same for the EU and international initiatives. It is important to learn from lessons of the past, but also build on work and innovation that have achieved so far.

The expert discussion noted five matters for consideration for effective EU-international cooperation:

  1. Urgency. Climate change is setting the agenda and it is clear there is no negotiation with climate and biodiversity. The IPCC report indicates the urgency to deal with sustainability matters, including developing sustainability reporting standards.
  2. Inclusiveness. The conversation must focus on the EU and international dimensions as this is about collaboration rather than competition between initiatives. The regulatory mandates followed by the EU on the one hand – servicing stakeholders and public policy objectives – and international initiatives on the other – servicing investor protection and capital markets integrity – should aim to be as compatible as possible. It is important to establish interoperability, interconnectivity to make it easier for the preparers and users of information.
  3. Double materiality. A challenge is the difference in approaches in terms coverage, comprehensiveness, thematic and double materiality vs financial materiality. As it stands today, the EU initiative may have more detailed requirements or additional disclosures related to impact materiality, but more details do not mean incompatibility with other initiatives. In order to ensure sustainability reporting standards are fit for the future, going forward a double materiality approach will be critical.
  4. Consistency in language. Lack of consistency in the terminology can create challenges for preparers and users of information. Aligning the wording between the EU and international initiatives from the start is important to ensure the creation of a universally applicable language.
  5. Digitisation. Technology has a huge potential to resolve potential issues with multiple standards. Digitisation needs to happen from the start learning from lessons of the past in the financial reporting digitisation. First, a structure supporting a taxonomy should be created to allow for successful digitisation of information. It is also important however to keep the balance between quantitative data and narrative.