May 2021

  • Commissioner McGuinness invites EFRAG to start developing draft sustainability reporting standards
  • Taxonomy’s Article 8 draft delegated act unveiled
  • IFRS Foundation Feedback Statement to Sustainability Reporting Consultation

Accountancy Europe publishes sustainability checklist for SMEs

Accountants should use the 3-step checklist to help guide the conversation with their SME clients about their business sustainability. It was developed in collaboration with the European Association of Co-operative Banks (EACB), and is a follow-up to our 2020 SME sustainability risk management publication.

The checklist facilitates building a sustainability profile for the business, thereby enabling:

  • the accountant to advise and help introduce new controls and organisational changes that facilitate the monitoring of sustainability factors specific to the business
  • to gather relevant sustainability information to help guide SME owner-managers’ decisions, and eventually to report it to external stakeholders
  • to identify where relevant sustainability information on the business is currently not available, and will need to be identified and developed

The checklist’s 3 steps consist of:

1. building the business profile

2. conducting a sustainability risks calculation to identify key risk areas and where information is lacking

3. taking steps towards monitoring, improving and eventually reporting

It is important to note that the checklist is not a standard or tool for sustainability disclosures or non-financial reporting. Rather, it aims to help build up SMEs’ ‘sustainability maturity’ and, eventually, make it possible for the business to report on its business sustainability.

EC delays the proposals on Sustainable Corporate Governance

According to the latest news, the EC proposal on Sustainable Corporate Governance, which was due to be launched in June, will now be delayed until autumn. The file now will also be shared between Justice Commissioner Didier Reynders and Internal Market Commissioner Thierry Breton.

Commissioner McGuinness invites EFRAG to start developing draft sustainability reporting standards

These standards should be built on the proposals of EFRAG’s project task force on EU non-financial reporting standards. This work is to be undertaken in parallel to the negotiations of the proposed CSRD, and to the establishment of the new governance structures for EFRAG as set out in the proposals by EFRAG’s President.

EFRAG is expected to deliver the first set of draft standards on 15 June 2022 only after:

  • its governance reforms have been finalised and
  • the co-legislators have reached an agreement on European Commission (EC)’s proposals on the CSRD

Read more

European Parliament (EP) plenary adopts the Just Transition Fund (JTF)

The JTF will help EU countries deal with the economic and social impact of the transition towards climate neutrality. It will focus on aspects like training and workers’ inclusion, funding to micro-enterprises, business incubators and universities, and investments in new sustainable technologies. Member States’ commitment to the climate goals by 2050 is a key condition to access the fund. As a next step, the JTF must be adopted by the Council.

Read more

Taxonomy’s Article 8 draft delegated act unveiled

The EC published the Taxonomy’s Article 8 draft delegated act. It will ensure transparency in the market and prevent greenwashing. The draft delegated act specifies the disclosure obligations under Article 8 of the Taxonomy Regulation (content of KPIs related to turnover, capital and operational expenditure, methodology and presentation of information).

Stakeholders can provide feedback on the draft delegated act until 2 June 2021.

Read more

Five NGOs leave EU Platform on Sustainable Finance after Taxonomy Climate delegated act publication

WWF, BEUC, ECOS, BirdLife, and Transport&Environment suspended their activities within the EU Platform on Sustainable Finance due to their concerns over the labelling of certain activities in the EC’s EU Taxonomy proposal presented on 21 April. In their view, the political interference has undermined the Taxonomy principles and led to an approach which is not based on scientific evidence. The main issue was the classification of the industrial logging and biomass energy as green investment.

Read more

Chair of the EU Platform on Sustainable Finance concerned over the Taxonomy Climate delegated act

Nathan Fabian, Chair of the EU Platform on Sustainable Finance, called for a review of the governance and transparency in the decision making of the EU Taxonomy criteria, following the publication of the EC Climate delegated act on 21 April. He confirmed the engagement of the EU Platform in keeping the science-based evidence at the core of the Taxonomy. It will ask for a review of the proposal if those would not be met. The EU Platform continues advising the EC on extension of the Taxonomy and criteria for further environmental objectives. Further recommendations are due shortly.

Read more

Business organisations express concern on the upcoming Sustainable Corporate Governance initiative

BETTER FINANCE, ecoDa, European Family Businesses, EuropeanIssuers, Federation of European Securities Exchanges, Invest Europe, and SMEUnited shared their concerns over the Sustainable Corporate Governance proposal in a joint letter to the EC. Signatories consider that:

  • due diligence and corporate governance should be treated separately
  • directors’ duties are already included in many corporate governance codes
  • the initiative should not go beyond the form of recommendations, to not paralyse the board’s functioning and obstruct companies’ sustainable transition

Read more

Council and EP reached interinstitutional provisional agreement on the European Climate Law

The initiative aims to make the EU’s climate targets legally binding, notably climate neutrality by 2050 and the reduction of GHG emissions of 55% by 2030. The EP’s ENVI Committee approved the agreement reached in the Council at ambassadors’ level on 10 May. The proposal will be submitted to the plenary vote between 23 and 24 June. The Council will then need to approve the proposal at ministerial level.

Read more

CEPS final report on the NFRD

The Centre for European Policy Studies (CEPS) published a study as part of the ongoing monitoring of the implementation of Non-Financial Reporting Directive (NFRD). The EC’s DG FISMA has commissioned this report to CEPS. The report analysed the data of 17 million companies within the EU. Among the main findings:

  • 2.000 companies (excluding subsidiaries) are within the scope of NFRD (EU27)
  • 10.000 companies are obliged to prepare non-financial statements based on broader transposition of the Accounting Directive and NFRD into national legislation
  • 9.000 public interest entities (PIEs) and large non-PIEs report without a legal requirement
  • the average administrative yearly costs to provide non-financial statements under the NFRD is 82.000 €

Read more

IFRS Foundation Feedback Statement to Sustainability Reporting Consultation

The IFRS Foundation Trustees’ response to the feedback received to their Consultation Paper: Sustainability Reporting is to:

  • create a new sustainability board: International Sustainability Standards Board (ISSB)
  • decide the strategic direction of the ISSB will be investor focus for enterprise value, addressing sustainability scope, building on existing initiative, striving for a ‘building blocks’ approach
  • set up a technical readiness working group to accelerate global convergence and undertake technical work for the ISSB
  • set up a multilateral working group to provide a forum to advise the ISSB on relevant sustainability topics, while also supporting mechanisms to facilitate, coordinate and promote consistency on any wider sustainability reporting requirements, including complementary jurisdiction-specific reporting standards

Read more

IFRS Foundation ED: Amendments to the Constitution to accommodate an ISSB

Following the Feedback Statement and the Trustees response, the IFRS Foundation issued an Exposure Draft (ED) proposing amendments to the constitution to accommodate the creation of an ISSB within the organisation’s governance and structure. The amendments include revisions to the objectives of the Foundation and the institutional arrangements for the ISSB.

The consultation is open for comment until 29 July 2021.

Read more

IOSCO sees strong support for its vision for an ISSB under the IFRS Foundation

Stakeholders strongly supported the creation of an ISSB under the IFRS Foundation and building upon existing initiatives, in the two roundtables jointly organised by IOSCO Sustainable Task Force and the World Economic Forum. IOSCO gathered views on:

  • how to operationalise and legitimise the ISSB standards
  • how to collaborate with the IFRS Foundation technical readiness working group. Priority areas suggested include quantitative metrics, forward looking metrics and methodologies for scenario analysis, interconnectivity, industry-specific metrics, promotion of digitalisation

Read more

VBA’s position paper on standardisation of disclosure requirements

Value Balancing Alliance (VBA) develops methodology along the double materiality concept to support standardisation. In its latest position paper, VBA suggests:

  • policy makers adopt a building block approach to harmonise disclosures
  • aligning taxonomies with standards to ensure data availability and robustness
  • aiming for clear and consistent global standards
  • standard setters and policy makers engage with practitioners and data providers
  • being cautious with branding “brown sectors”, as it may affect capital allocation where there may be possibilities of innovation and transition

Read moreThis curated content was brought to you by Vita Ramanauskaité, Accountancy Europe senior policy advisor since 2015. You can send her tips by email, follow her on Twitter and connect with her on LinkedIn.