This EU's directive mandates due diligence for human rights and environmental protection. Learn how accountants can facilitate compliance and sustainability transition
Read our guide on six key ways boards can drive the sustainability transition, featuring practical insights from experts and board members
The European Commission (EC) published a set of 90 frequently asked questions (FAQs) on the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) delegated act rules implementation. These are meant to clarify specific provisions laid out in the CSRD and ESRS to help stakeholders meet regulatory requirements and reduce the administrative burdens of sustainability reporting for companies. The FAQs cover matters such as:
Ursula von der Leyen (VDL), who was re-elected as EC’s President for a second five-year term in July, unveiled the new College of Commissioners on 17 September in Strasbourg. VDL assigned thematic portfolios to the Commissioner candidates appointed by EU Member States. Portuguese Maria Luis Albuquerque will oversee the Directorate-General for Financial Stability, Financial Services, and Capital Markets Union (DG FISMA), which is responsible for EU policy on financial services including sustainable finance.
As next steps, Commissioner candidates will appear in public hearings at the EP (dates tbc). The EP has the power to approve or reject the EC composition as a whole.
On 9 September, Mario Draghi, former Italian Prime Minister, and the European Central Bank (ECB) President issued his long-awaited report on the future of European competitiveness. The report sets out an in-depth analysis and recommendations to help the EU regain its global competitiveness.
It calls for significantly reducing the regulatory burden on companies, warning that further changes to the CSRD framework might increase compliance costs. Draghi also stresses the need for clearer differentiation in reporting requirements between SMEs and large companies and highlights the importance of promoting standardised carbon footprint measurement.
On 25 July, the Corporate Sustainability Due Diligence Directive (CSDDD) entered into force mandating companies to identify and address adverse human rights and environmental impacts throughout their ‘chains of activities’. On the same day, the EC published a set of FAQs outlining the CSDDD’s objectives, content of obligations, scope, enforcement and expected impact.
EFRAG published the XBRL Taxonomies for ESRS Set 1 and Article 8 disclosures to enable digital tagging of sustainability reporting as required per the CSRD. Those taxonomies will be the basis for the European Securities and Markets Authority (ESMA) to develop regulatory technical standards for marking up the ESRS sustainability statement.
EFRAG issued a study providing an overview of early ESRS implementation practices based on interviews with 28 large EU companies. The study focuses on four key areas:
The Guidelines on Enforcement of Sustainability Information (GLESI) along with a public statement on the first application of ESRS aim to support a consistent application and supervision of sustainability reporting requirements. They align with two key ESMA recommendations:
ESMA will continue to monitor sustainability reporting and the GLESI application in 2025.
ESMA issued an opinion on enhancing the usability and coherence of the EU sustainable finance regulatory framework for investors. The opinion provides a long-term vision of how the EU sustainable finance regulatory framework should work to achieve its ideal end-state. It also includes policy recommendations covering the entire Sustainable Investment Value Chain (SIVC).
The guidelines clarify when the use of Environmental, Social and Governance (ESG) or sustainability-related terms in fund names is deceptive or unfair. They apply to For instance, funds using transition, environment, or sustainability-related terms must meet at least the 80% investment threshold for environmental and social objectives.
The three European Supervisory Authorities (ESAs) – European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and ESMA – issued a consolidated set of questions and answers (Q&A) on the Sustainable Finance Disclosure Regulation (SFDR). The document compiles the EC’s and ESA’s responses on the SFDR practical implementation.
On 22 July, the International Ethics Standards Board for Accountants (IESBA) submitted its comments to the Committee of European Auditing Oversight Bodies’ (CEAOB) on its draft non-binding guidelines for limited assurance engagements under the CSRD.
The EC invited the CEAOB to develop these guidelines to contribute to consistent assurance engagements across the EU before a European limited assurance standard adoption in 2026.
The IESBA emphasised the importance of including robust ethics and independence requirements to ensure quality, integrity and effectiveness of the assurance framework. They, therefore, recommended leveraging the IESBA’s International Code of Ethics for Professional Accountants to avoid major differences between the EU and international frameworks.
GRI and World Benchmarking Alliance
How to strengthen corporate accountability: the case for unlocking sustainable corporate performance through mandatory corporate reporting
European Commission
European Climate Law amendment
EFRAG
New ESRS Q&A explanations covering the January-July 2024 period
IFRS
Climate-related and other uncertainties in the financial statements
IFRS
Climate-related and other uncertainties in the financial statements
PwC
About the sustainability reporting guide
