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Sustainability

November 2023

Highlights

  • EC launched call for evidence to rationalise EU reporting requirements
  • EFRAG launches ESRS Q&A platform to support ESRS implementation
  • Council adopts EU green bond standard regulation
  • IAASB issues FAQs on materiality assessment

Feature story

Final adoption of ESRS

Accountancy Europe welcomes the adoption of the delegated act with the first set of 12 European Sustainability Reporting Standards (ESRS) that still have to be published in the European Union’s (EU) Official Journal. The ESRS will enter into effect on 1 January 2024 and will be applied by the first companies in the Corporate Sustainability Reporting Directive’s (CSRD) scope.

Accountancy Europe has contributed to all the steps of the development of the ESRS from the initial thinking of the EFRAG’s project task force, to the Exposure Drafts and ultimately the draft delegated act. We have always striven for clear and robust ESRS to support high-quality implementation and provide transparent information to catalyse transiting toward more sustainable business models.

We will continue our work on sustainability reporting standards as we support both European and international standards. We will soon contribute to the upcoming EFRAG draft Materiality Assessment Implementation Guidance and the draft Value Chain Implementation Guidance, two key ESRS concepts.

 

EU developments

EC launched call for evidence to rationalise EU reporting requirements

The European Commission (EC) published the call for evidence on the rationalisation of reporting requirements on 17 October. Stakeholders can provide feedback until 28 November.

The EC calls on stakeholders to help identify areas where the EU reporting requirements could be:

  • removed as redundant, duplicating or obsolete
  • changed in terms of frequency or timing
  • modernised, e.g., by introducing digitalisation
  • optimised, e.g., by using the “once only” principle where businesses would not have to submit the same data for different obligations, or replacing 27 different data entry points with one EU entry point

As a follow-up, the EC will organise workshops with relevant stakeholders to further identify reporting optimisation opportunities in specific areas of the EU legislation.

Read more

 

EC adopts final delegated act on adjusting SME thresholds

The EC adopted the DA to adjust SME thresholds in the EU Accounting Directive for inflation on 17 October. The EP and Council now have two months to reject it. If they do not, it will automatically enter into force.

The final DA contains only very little changes compared to the draft DA that was flagged in the October Sustainability Update. However, it clarifies the timeline for the new thresholds’ application. Member States are to apply these new thresholds at the latest from financial year 2024, with the possibility to opt for early application for financial year 2023.

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Sector-specific ESRS postponed

The EC issued a decision to amend the set deadlines for sustainability reporting standards adoption in the Corporate Sustainability Reporting Directive (CSRD):

  • sector specific ESRS by 30 June 2026 (instead of 2024)
  • non-EU companies standards by 30 June 2026 (instead of 2024)

This will allow companies to focus on the first ESRS set implementation and ensure that EFRAG has enough time to work on the sectoral ESRS.

The decision will enter into force on the 20th day following its publication in the EU Official Journal.

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EFRAG launches ESRS Q&A platform to support ESRS implementation

EFRAG’s ESRS Q&A Platform will collect and answer technical implementation questions on ESRS. As the EC’s technical advisor, EFRAG will provide non-authoritative responses.

Read more

 

EFRAG’s work on ESRS continues

Before the end of the year, EFRAG will open for consultation:

  • exposure draft: draft ESRS for listed SMEs
  • exposure draft: draft voluntary ESRS for non-listed SMEs
  • materiality assessment implementation guidance
  • value chain implementation guidance

In addition, EFRAG published its first draft of the datapoints in set 1 ESRS for the Sustainability Reporting Board’s meeting on 25 October.

 

Council adopts EU green bond standard regulation

On 23 October, the Council adopted the EU green bond standard regulation, with Austria, Germany and Luxembourg abstaining.

This follows the EP’s endorsement of the political agreement on the file, reached earlier this year.

To recall, the EU green bond standard is meant for companies and public entities that wish to raise funds on capital markets to finance green investments while meeting sustainability requirements. The regulation also sets up a registration system and supervisory framework for external reviewers of EU green bonds.

The regulation will be published in the EU’s Official Journal before entering into force 20 days later.

 

Stakeholder Request Mechanism for EU Taxonomy

The EC and the EU Platform on Sustainable Finance launched a Stakeholder Request Mechanism on the EU Taxonomy activities. This online tool enables stakeholders to suggest new activities to be added to the EU Taxonomy and/or to propose changes to existing ones. The initial input deadline is 15 December 2023. Following this, the tool will continue to operate, and a second-round comment deadline will be announced.

 

ESMA’s 2023 enforcement priorities

ESMA issued its annual public statement outlining its enforcement priorities for 2023. Priorities related to sustainability statements: are as follows:

  • Article 8 of the Taxonomy Regulation
  • targets, actions and progress
  • scope 3 emissions

ESMA will also start monitoring progress towards ESRS reporting, particularly for the listed companies which are the first in scope.

 

ESMA Taxonomy reporting fact finding

ESMA issued the results of a fact-finding exercise on corporate reporting practices under the EU Taxonomy Regulation, aiming to evaluate the following aspects:

  • disclosure of mandatory KPIs
  • use and completeness of the mandatory reporting templates
  • disclosure of mandatory qualitative information
  • materiality exemption
  • other areas of incorrect application
  • good reporting practices

 

Council conclusions for COP 28

The Council approved conclusions that will serve as the EU’s negotiating position for the United Nations Climate Change Conference (COP 28). In its conclusions, the Council:

  • emphasises the importance of increasing global ambition towards climate neutrality
  • stresses the need to phase out fossil fuels globally and increase renewable energy capacity
  • highlights the importance of making greater efforts to integrate climate change mitigation and adaptation
  • calls on countries to scale up their efforts to mobilise financing from all sources to support climate action and address loss and damage from the adverse impacts of climate change

International developments

IAASB issues FAQs on materiality assessment

The International Audit and Assurance Standards Board (IAASB) issued Frequently Asked Questions (FAQs) on the application of materiality by the entity and the assurance practitioner. These FAQs aim to help stakeholders to navigate the recently proposed International Standard on Sustainability Assurance (ISSA) 5000 and address such questions as:

  • how the concept of materiality applies to sustainability reporting and assurance
  • definition of double materiality
  • how an assurance practitioner considers an organisation’s materiality process during a sustainability assurance engagement

 

Brazil adopts ISSB standards

Brazil will incorporate the International Sustainability Standards Board’s (ISSB) IFRS Sustainability Disclosure Standards into its regulatory framework. The responsible public authorities will set out a roadmap to start with a voluntary use in 2024 and move to mandatory use on 1 January 2026.

Read more

 

ISSB two-year agenda starts to form

The ISSB consulted stakeholders on their agenda priorities for the next two years. Preliminary insights into received feedback indicate common themes:

  • providing a roadmap for ISSB’s activities
  • focusing on interoperability with GRI and ESRS
  • balancing the ISSB’s activities between “supporting IFRS S1 and S2 implementation” and “developing new projects”

This is fully aligned with Accountancy Europe’s contribution.

Also, the IFRS Foundation is considering updates to its Due Process Handbook to better support the ISSB sector-related standard activities and to formalise the cooperation between the two boards.

The ISSB also published documents detailing the revision of the SASB standards.

 

ISSB educational material

The ISSB will publish its own interoperability table between its first IFRS sustainability standards and the ESRS as an educational material.

The ISSB will also consider the following preliminary items to be issued as educational materials:

  • how to apply the climate requirements in IFRS S2
  • guidance on the requirements of current and anticipated financial effects
  • interoperability with other standards, particularly ESRS and GRI
  • how to identify sustainability risks and opportunities and how to disclose information as per general requirements in IFRS S1
  • how to measure and disclose GHG emission, including considerations on consolidation

National developments

Letter to ISSB on Agenda Priorities

The UK Endorsement Board (UKEB), Canadian Accounting Standards Board, Malaysian Accounting Standards Board and External Reporting Board jointly wrote to the ISSB to reiterate their shared suggestions in view of the ISSB’s Agenda Consultation. They:

  • encourage the ISSB to work on connectivity
  • suggest the ISSB develops a long-term roadmap
  • suggest the ISSB prioritises the implementation work of its first 2 standards

Read more

Other news

Events

This curated content was brought to you by Vita Ramanauskaité, Accountancy Europe Manager, Head of Sustainability, since 2015. You can send her tips by email, follow her on Twitter and connect with her on LinkedIn.