Read our response to the ISSB’s consultation regarding its agenda priorities
Check out the key takeaways from our roundtable discussion
We responded to the International Sustainability Standards Board’s (ISSB) request for information: Consultation on Agenda Priorities. In our statement highlighting our main messages, we suggest that the ISSB:
The second trilogue on the Corporate Sustainability Due Diligence Directive (CSDDD) took place on 7 September. Rapporteur updated the Legal Affairs (JURI) committee on the negotiations progress. Topics currently under discussion:
The third trilogue is expected to take place in November.
On 5 October, the EP debated the EU Green Bond Standard during the plenary session. The day after, the EP endorsed the political agreement on the file reached earlier this year with big majority: 418 votes in favour, 79 votes against and 72 abstentions. 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. As rapporteur MEP Paul Tang (S&D, Netherlands) noted, the EU Green Bond Standard will bring “three Ts”: transparency, trust and transition.
The European Commission (EC) launched two consultations – a targeted and a public one – to gather stakeholders feedback on the Sustainable Finance Disclosure Regulation (SFDR). The SFDR came into effect in March 2021; however, Commissioner McGuinness announced a comprehensive assessment of potential shortcomings in 2022. These consultations investigate several issues such as legal certainty, usability and the prevention of greenwashing. Stakeholders can provide their feedback by 15 December 2023.
Commissioner McGuinness addressed the EP JURI Committee to discuss the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS) on 7 September. McGuinness confirmed that sectoral ESRS will be postponed to 2026 to grant companies more time to adjust.
The EC launched a draft Delegated Act (DA) for stakeholder consultation, proposing to increase the balance sheet and turnover thresholds in the Accounting Directive by an average of 25% to adjust them to inflation. This is a technical measure provided for by the Accounting Directive. The EC states that these size thresholds have remained unchanged since 2013 and that this will reduce the scope of companies having to comply with requirements on publication of financial statements, audit, as well as sustainability reporting. The ‘final’ DA will be scrutinised by the EP and the Council presumably later this year.
It is confirmed that the EC will present the next set of proposals to rationalise reporting requirements together with the EC’s work programme in October 2023.
The EC adopted the DA on the first set of 12 ESRS and published a Q&A on the standards. The DA is now under a 2-month (extendable by another 2-month) scrutiny period by the EP and the Council, which can accept or reject, but not change the standards content.
Upon the adoption, the EC, EFRAG and the ISSB confirmed a high degree of alignment for the climate standard.
Accountancy Europe contributed to all public consultations leading to the ESRS finalisation, including providing feedback on the draft DA (see a statement here).
The joint statement confirms that:
As next steps, EFRAG and GRI will publish a list of the ESRS disclosure requirements and datapoints that correspond to the GRI ones and work on a digital taxonomy for their respective standards.
Sue Lloyd, ISSB Vice-chair, stated that the ESRS and ISSB standards have been aligned where possible, but there are differences. There is no joint interoperability statement foreseen between ISSB and EFRAG/EC.
However, EFRAG published a separate ISSB-ESRS interoperability analysis as part of its 23 August Sustainability Reporting Board agenda. The ISSB may also publish its own version as an educational material for its standards.
As per EC’s request, EFRAG is developing guidance on the first ESRS set:
EFRAG plans to initiate consultations for both documents concurrently, allowing a 4-week comment period, within 2023. There is, however, no confirmed due process or timeline for these deliverables as they were not foreseen in EFRAG’s mandate as per the CSRD.
In addition, EFRAG is working on the second ESRS set, composed of:
EFRAG aims to finalise its work and approve the Exposure Drafts on these standards by the end of November.
EFRAG called for tenders to help develop cost-benefit analysis for both listed SMEs and voluntary non-listed SMEs standards (deadline: 20 October).
Finally, EFRAG reactivated its sector-specific communities and called for new applications.
The European Supervisory Authorities (ESAs) developed an overview of good practices and areas that need improvement for the entity-level and product level voluntary principle adverse impact (PAI) disclosures under the SFDR. The results show an overall improvement compared to the previous year. The report also includes some recommendations for the EC to consider ahead of the SFDR’s comprehensive review.
G20 Leaders endorsed the revised G20/OECD Principles of Corporate Governance at the G20 Summit on 9-10 September 2023.
The goal is to promote corporate governance policies that support the sustainability and resilience of corporations and contribute to the sustainability and resilience of the broader economy.
The revised Principles include a new chapter on “Sustainability and resilience”. It provides recommendations to support companies in managing the risks and opportunities of the climate transition and other sustainability matters.
The International Auditing and Assurance Standards Board (IAASB) released the exposure draft of its International Standard on Sustainability Assurance 5000, General Requirements for Sustainability Assurance Engagements (ISSA 5000).
ISSA 5000 as proposed is a stand-alone, principles-based standard that will serve as a global baseline for sustainability assurance engagements. It is profession-agnostic and reporting framework neutral. It includes requirements and application material for both reasonable and limited assurance engagements.
The consultation runs until 1 December 2023, and Accountancy Europe is already crafting its comment letter.
The International Organization of Securities Commissions (IOSCO) endorsed the ISSB IFRS S1 and IFRS S2 standards. IOSCO determined that these standards are appropriate to serve as a global framework for capital markets. Also, IOSCO called on its 130 member jurisdictions to consider ways in which they might adopt, apply or be informed by the ISSB standards within their jurisdictional arrangements’ context.
The Financial Stability Board acknowledged that the ISSB standards mark “the culmination of the work of the TCFD” and asked the IFRS Foundation to take over the monitoring of the progress on companies’ TCFD disclosures.
In this spirit, the IFRS Foundation published a comparison of the requirements in IFRS S2 Climate-related Disclosures and the TCFD recommendations.
ISSB will develop educational material and illustrative examples on IFRS S2 Climate-related Disclosures. In addition, ISSB and IASB Vice-chairs held a webinar discussing connectivity between financial statements and sustainability-related financial disclosures.
The Transition Implementation Group on IFRS S1 and IFRS S2 announced its membership and is ready to start their work on the implementation support for these standards.
The International Accounting Standards Board (IASB) will explore targeted actions to improve the reporting of Climate-related and Other Uncertainties in the Financial Statements. The possible outcomes include development of educational materials, illustrative examples and targeted amendments to IFRS Accounting Standards.
This follows feedback received in the IASB’s Agenda Consultation and numerous publications highlighting a gap between financial reporting and sustainability considerations. These include:
The Taskforce on Nature-related Financial Disclosures (TNFD) Recommendations consist of:
The Financial Reporting Council (FRC), in its role as the Secretariat to the UK Sustainability Disclosure Technical Advisory Committee, issued a call for evidence (deadline 11 October) on the IFRS Sustainability standards to inform their proposed endorsement in the UK.
The UK FRC continued its work on the state of play of sustainability reporting by issuing:
2024 Annual Work Programme
Sustainable Finance: Implementation timeline
Letter from Carol Adams, GSSB Chair
The State of Play: Beyond the G20
Regulatory deadlines loom and only 25% of companies feel ready to have ESG data independently assured: KPMG research
Remarks before the Financial Stability Oversight Council: Climate Risk Disclosure
We Mean Business Coalition
Study of EU 100 Largest Companies Shows Streamlining and Precision Needed For optimal EU Green Taxonomy