February 2022

  • Guidance on the Taxonomy Disclosures Delegated Act implementation FAQs on Article 8
  • EU Taxonomy Complementary Delegated Act
  • EFRAG PTF-ESRS publishes Batch 1 of Working Papers on ESRS
  • Sustainable Corporate Governance – latest developments

Supply chain sustainability assessment: Current market practice insights

Our latest paper, written in collaboration with the European Group of International Accounting Networks and Associations (EGIAN), explains what supply chain due diligence is and how supply chain assurance works.

Accountancy Europe interviewed members to understand how they help businesses to manage supply chains. Our interviews show that accountancy firms, including small and medium-sized accountancy networks and associations, are increasingly prepared to review the sustainability of supply chains.

We discuss market practices with three expert representatives of smaller accountancy firms. We consider what is needed for reliable and robust assurance on the supply chain, including:

  • common standards and methodologies for high quality assurance
  • qualities, expertise, capabilities and skills of assurance service providers
  • ethical requirements and independence standards

ECON considers amendments to the CSRD

The European Parliament (EP) Economic and Monetary Affairs (ECON) committee considered the tabled amendments (AMs 68 – 237 & AMs 238 – 523) to its draft opinion on the Corporate Sustainability Reporting Directive (CSRD).

MEP Jessica Polfjärd (EPP/Sweden) – rapporteur for opinion – noted that there are several matters where views differ, e.g., scoping in SMEs of high-risk sectors. Some MEPs noted that it is important to consider the international sustainability standards adopted by the International Accounting Standards Board (IASB). Others would like to see a European sustainability reporting board (i.e., body responsible for the EU standard setting) that would be a public body.

ECON vote is foreseen on 28 February. Leading Legal Affairs committee (JURI) is expected to vote in March.

ECON amendments on the green bonds proposal

The EP’s ECON committee tabled amendments (AMs 214-510) to the draft report by the lead MEP Paul Tang (S&D/Netherlands). Among other changes, the MEP proposes that external reviewers shall not provide services other than activities concerning the EU green bonds. Consideration of AMs is scheduled for 28 February. The committee is expected to vote on the file on 31 March.

ESMA on possible challenges on EU green bonds

European Securities and Markets Authority (ESMA) Chair Venera Ross sent a letter to the EP and the European Commission (EC) on the proposal for EU green bonds regulation. To recall, ESMA is expected to undertake a supervisory role for external reviewers. In this letter, Chair shared ESMA’s key observations on possible challenges concerning their expected mandate, in particular:

  • timeline for measures’ implementation – there are provisions (in level 2) for ESMA to deliver prior to the start of its supervisory mandate and within 12 months after entry into force
  • functioning of the third country regimes
  • resourcing and funding model provided for ESMA’s supervision

Guidance on the Taxonomy Disclosures Delegated Act implementation FAQs on Article 8

The EC issued a second FAQs batch to clarify the provisions in the Disclosures Delegated Act, aiming to help with its implementation. The FAQs are meant to assist large banks, investors, insurers and non-financial companies to report EU Taxonomy eligibility disclosures.

EU Taxonomy Complementary Delegated Act

The EC approved in principle a Complementary Climate Delegated Act (DA) that covers certain gas and nuclear activities. The DA introduces:

  • additional economic activities from the energy sector into the EU Taxonomy
  • specific disclosure requirements for businesses related to their activities in the gas and nuclear energy sectors

The College of Commissioners reached a political agreement, and it will be formally adopted once it is translated to all EU languages. The DA will be subject to co-legislators’ scrutiny.

Read more

EU Platform on Sustainable finance concerns over the Complementary Delegated Act

EU Platform on Sustainable finance provides feedback on the Complementary Delegated Act on fossil gas and nuclear energy. The report provides feedback on the technical screening focusing on environmental performance and usability aspects.

The Platform also:

  • identified limitations and recommendations for companies and financial products in case the DA is adopted
  • noted that the draft DA activities are not in line with the Taxonomy Regulation and most members see a serious risk of undermining the sustainable Taxonomy framework
  • expressed its concerns about the draft criteria and how they would work in practice while many of its members are alarmed about the potential environmental impacts

EFRAG PTF-ESRS publishes Batch 1 of Working Papers on ESRS

This Batch 1 includes the preparatory documents for five standards and two reporting guidelines. The working papers, which are not open to public consultation, include:

  • four cross-cutting standards:
    • strategy and business model
    • sustainability governance and organisation
    • sustainability material impacts, risks and opportunities
    • definitions for policies, targets, action plans and resources
  • one topical standard:
    • climate change
  • two conceptual guidelines:
    • double materiality
    • characteristics of information quality

Read more

13 new member organisations join EFRAG’s Sustainability Reporting Pillar

The European Financial Reporting Advisory Group (EFRAG) welcomed thirteen new member organisations as part of its sustainability pillar in its organisational structure.

Read more

EFRAG calls for candidates for its Sustainability Reporting Board, Chair and Members of its Sustainability Reporting TEG

EFRAG launched a call for candidates for the Sustainability Reporting Board, which will be responsible for developing European Sustainability Reporting Standards (ESRS). Only EFRAG Member Organisations can nominate candidates, and the deadline for doing so is January 10.

In parallel, EFRAG Administrative Board launched two calls for candidates, one for the Chair and the other for the Members of the EFRAG Sustainability Reporting Technical Expert Group (TEG). Applications must be submitted by 28 February.

Sustainable Corporate Governance – latest developments

The EC’s proposal on Sustainable Corporate Governance is now scheduled for 23 February. According to our information, its focus is likely to be environmental and human rights due diligence, with lower level of ambition regarding directors’ duties.

In parallel, French MEP Pascal Canfin and a group of CEOs and business leaders urge the EC, in a joint letter, to link the executive pay to sustainability objectives. In a separate move, over 100 companies, investors and business associations have also called on the EU to swiftly adopt due diligence legislation. Furthermore, a group of MEPs have asked the EC to provide more clarity behind the decisions of the Regulatory Scrutiny Board.

The IFRS Foundation completes the consolidation of CDSB

As of January 31, the Climate Disclosure Standards Board (CDSB) has been fully consolidated into the International Financial Reporting Standards (IFRS) Foundation. This integration confirms the closure of CDSB, which will no longer produce technical or content, even though its older resources will remain available online.

Read more

ISSB appoints a Vice-Chair and a Special Advisor to the Chair

Sue Lloyd has been appointed as Vice-Chair of the International Sustainability Standards Board (ISSB), effective from 1 March 2022. For this new role, Sue Lloyd will resign from current role as the Vice-Chair of the IASB.

In addition, Janine Guillot has been appointed as a Special Advisor to the ISSB Chair. Janine Guillot is currently the CEO of the Value Reporting Foundation, which will be soon consolidated in the IFRS Foundation structures.

Read more

Interview with ISSB Chair Emmanuel Faber

In this first interview, Faber highlights the need to change the current linear economic model and move away from short-termism. The ISSB Chair also hinted at an upcoming ISSB consultation to hear stakeholder’s views on the future ISSB workplan.

Read more

FRC’s preliminary thoughts to the ISSB

The UK Financial Reporting Council (FRC) published their preliminary comments on the prototype standards developed by the Technical Readiness Working Group.

The FRC strongly supports the development of global sustainability reporting standards and the UK adoption of those standards. They recommend the International Sustainability Standards Board (ISSB) to:

  • provide stakeholders with an outline of the architecture of the standards
  • consider the four pillars of the Task Force on Climate-related Financial Disclosures (TCFD) in the context of the overall framework for narrative reporting; and
  • discuss the extent to which governance reporting will be within the scope of the ISSB standards.

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.