Sustainability update

June 2024


  • Council gives its final approval of CSDDD
  • ESMA issues recommendations on greenwashing
  • EFRAG provides guidance to ESRS
  • ISSB and GRI deepen collaboration

Feature story

Accountancy Europe’s response to EFRAG’s EDs on reporting standards for SMEs

Accountancy Europe responded to EFRAG’s public consultation on the voluntary (VSME) and listed SME (LSME) draft standards. We support efforts to help SMEs make their business models more sustainable and to report accordingly, including in response to sustainability data requests from larger businesses and financial institutions.

Our recommendations to make the standards more fit for purpose in that regard:

  • LSME:
    • the standard remains too complex to be a helpful value chain cap, and it should have been drafted with a ‘bottom-up’ approach rather than trying to simplify full ESRS
    • the standard cannot be used by listed SME groups to prepare a consolidated sustainability report, which is an extremely significant issue that reduces its value as a simplification measure
    • the VSME standard – rather than the LSME one – should be set as the ‘value chain cap’
  • VSME:
    • we support the modular approach and consider the basic module to be proportionate. The ‘if applicable’ approach is also welcome
    • some of the business partners module metrics make reference to international initiatives such as the UN Guiding Principles on Business and Human Rights, or the OECD Guidelines for Multinational Enterprises. It is extremely unlikely that many SMEs will have the resources to read, analyse and extract specific datapoints to report from such long, complex and often high-level documents. We call on EFRAG to replace these disclosures with simple, objective metrics that should be relatively easily achievable with the information that most SMEs possess
    • for the VSME standard to become an accepted ‘market practice’, a lot of work will need to be made in raising awareness with potential SME users and their advisors, as well as to get a buy in from large businesses. SMEs will also need support and tools that are accurate and easy to use

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EU developments

Council gives its final approval of CSDDD

On 24 May, the Council formally adopted the Corporate Sustainability Due Diligence Directive (CSDDD). The directive covers very large companies proposing a phase-in approach for the application of requirements. The undertakings under the CSDDD are to:

  • impacts in their chain of activities on human rights and the environment
  • develop climate transition plans
  • ensure that a workable complaints mechanism is in place and engage with affected stakeholders
  • be held civil liability for intentionally or negligently violating the law and damaging natural or legal persons protected under national law

The CSDDD will be published in the Official Journal of the European Union (EU) and will enter into force after twenty days following its publication.

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ESMA issues recommendations on greenwashing

The European Supervisory Authorities (ESAs) published their final reports on greenwashing. In its report, the European Securities and Markets Authority (ESMA) investigates the role of supervision in mitigating greenwashing risks. The report scrutinises the current supervisory response and also provides recommendations on how supervision might be enhanced through a series of actions from NCAs, ESMA, and the EC.

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EFRAG provides guidance to ESRS

EFRAG issued its first three non-authoritative ESRS Implementation Guidance (IG) documents:

  • IG1 Materiality Assessment Implementation Guidance
  • IG2 Value Chain Implementation Guidance, and
  • IG3 List of ESRS datapoints

EFRAG also issued new non-authoritative technical explanations on ESRS to respond to stakeholders’ questions received through its Q&A platform.


Factsheet on EU Taxonomy uptake

The EC issued a factsheet on market uptake of the EU Taxonomy. Companies are increasingly committing to use the Taxonomy to meet the Green Deal objectives. The taxonomy-aligned investments grew from €191 billion in 2022 to €249 billion in 2023. The factsheet also highlights that the EU issued more than half of global green bond volume in 2023. The EC is developing implementation guidance accessible through the Taxonomy Navigator to improve the EU Taxonomy usability.

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International developments

IFRS launched jurisdictional guide

The International Financial Reporting Standards (IFRS) foundation launched the Inaugural Jurisdictional Guide at the International Organisation of Securities Commissions (IOSCO) annual meeting in Athens. The guide contains:

  • how jurisdictions are progressing towards sustainability reporting
  • how jurisdictions can use International Sustainability Standards Board (ISSB) standards, as per the IOSCO endorsement decision
  • the jurisdictional approaches to the adoption or other use of ISSB standards including adoption, partial adoption and permission to use

IOSCO underlined that this project strengthened its collaboration with the ISSB while inaugurating a new partnership with the World Bank. The International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA) that the guide will guarantee consistency and quality of sustainability disclosures.

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ISSB and GRI deepen collaboration

The ISSB and Global Reporting Initiative (GRI) committed to aligning common disclosures to ensure that companies that use both sets meet information needs of investors and broader stakeholders.

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IASB clarifies ESG features of financial assets

The International Accounting Standards Board (IASB) issued amendments to IFRS 9 Financial Instruments. Among other changes, these amendments clarify the classification of financial assets with environmental, social and corporate governance (ESG) and similar features.

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National developments

FCA publishes guidance on Anti-Greenwashing rule

The Financial Conduct Authority (FCA) issued a finalised non-handbook guidance on the Anti-Greenwashing rule to assist firms in its implementation. The Anti-Greenwashing rule requires sustainability-related claims to be fair, clear, and not misleading. It also provides the ground to challenge undertakings pursuing unfair communication on sustainable claims.

The FCA guidance:

  • helps consumers and firms to have confidence in identifying sustainable products
  • sustains the UK’s net zero emissions target

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UK Sustainability Reporting Standards

The UK launched an evaluation process to determine if IFRS S1 and S2 are suitable to become the first two UK Sustainability Reporting Standards (UK SRS). These standards will be integrated in a wider UK Sustainability Disclosure Reporting Framework. The final decision is expected in the first quarter of 2025.

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Other news

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 X and connect with her on LinkedIn.