March 2022

  • EC publishes proposal for a Corporate Sustainability Due Diligence Directive
  • Council reached general approach on the CSRD proposal
  • EFRAG issues new Working Papers on EU sustainability reporting standards
  • IFRS Foundation signs a Memorandum of Understanding to establish ISSB presence in Frankfurt

EC publishes proposal for a Corporate Sustainability Due Diligence Directive

On 23 February, the European Commission (EC) published the EU wide rules for mandatory corporate sustainability due diligence. The legislation will oblige large EU companies and non-EU companies operating in the EU – meeting specific employee and turnover thresholds – to address adverse impacts on human rights and environment in their own operations and in their value chains.

The proposal would cover approximately 13,000 EU companies and 4,000 non-EU companies. Although SMEs are not directly in the scope, they might be indirectly affected by the new rules through value chains.

Companies concerned will need to have a due diligence policy detailing

  • the company’s approach to due diligence
  • a code of conduct
  • the processes to implement due diligence, including
  • verifying compliance with the code of conduct

Company directors will be responsible for setting up and overseeing the due diligence actions and the due diligence policy and report to the board.

These rules will complement the EU rules on sustainability disclosures, including in financial services.

Next steps: The proposal will now go to the European Parliament (EP) and the Council for approval. Once adopted, Member States will have two years to transpose the Directive into national law. The Legal Affairs Committee (JURI) will be the lead committee on this file. Lara Wolters, MEP, has recently been officially appointed as rapporteur.

Accountancy Europe issued a public statement welcoming the proposal, sharing first impressions and offering the profession’s expertise to make this proposal operational and contribute to its success.

Council reaches general approach on the CSRD proposal

The Council voted its position on the Corporate Sustainability Reporting Directive (CSRD) proposal at the Competitiveness Council on 24 February. It was agreed on the following points, amongst others:

  • phased-in approach to reporting, starting with large PIEs (500 > employees) as from 1 January 2024
  • adopt the first set of reporting standards by 31 October 2022; the second set and SMEs proportionate standards by 31 October 2023
  • statutory auditor to conduct a limited assurance engagement
    • MS options allowing a statutory auditor other than the one carrying out financial audit to express opinion on sustainability reporting
    • MS option allowing an independent assurance service provider to express opinion on sustainability reporting if they are subject to equivalent requirements as set out in the Audit Directive
  • the EC shall adopt reasonable assurance standards no later than 6 years after the CSRD entered into force
  • MS to transpose the CSRD 18 months after its entry into force

The French Presidency will get in touch in with the EP to start negotiations as soon as possible.

Latest on the CSRD institutional debate

On 28 February, the EP Economic and Monetary Affairs (ECON) committee voted on its draft opinion (AMs 68-237, AMs 238 – 523, AMs 524 – 734) on the CSRD proposal. ECON approved the draft opinion with 29 votes in favour, 25 votes against and four abstentions. The lead JURI Committee will vote the EP’s position on 15 March.

CEAOB work programme for 2022

The Committee of the European Auditing Oversight Bodies (CEAOB) has published its 2022 work programme and the detailed plans of each of its sub-groups which, amongst other matters, refer to a follow-up on CSRD developments:

  • the CEAOB will assess the implications of this project in terms of control of such reporting by independent third parties, and if deemed appropriate will provide advice to the EC
  • the CEAOB will discuss challenges on assurance on sustainability information and determining those to be addressed in an assurance standard

ECON Committee considers proposed amendments to EU green bond standard

The EP’s ECON Committee considered the amendments tabled to the draft report on the European green bonds on 28 February. The proposed amendments considered the green bond standard’s voluntary nature, extending the scope to other types of bonds and green bonds external verification. The rapporteur MEP Paul Tang (S&D/Netherlands) noted that several matters have been already resolved. That includes the role of external reviewers, the European Securities and Markets Authority’s (ESMA) supervisory role or the national competent authorities’ role. Some MEPs opposed the expansion of scope to other types of bonds.

ECON committee is expected to vote on its position on 31 March.

EFRAG issues new Working Papers on EU sustainability reporting standards

The European Financial Reporting Advisory Group (EFRAG) issued new Working Papers on EU sustainability reporting standards throughout this month. These documents are made available for transparency purposes and are not subject to comments yet.

The following list is the complete set of currently public available working papers.

On conceptual guidelines for the standard setter:

On strategy, governance, impacts, risks, opportunities:

The complete set on environment topics:

On social topics:


No working papers have yet been made public on governance topics.

Eurosif joins EFRAG’s sustainability reporting pillar

On 18 February, the EFRAG General Assembly approved the admission of the European Sustainable Investment Forum (Eurosif) as a new member of EFRAG’s sustainability reporting pillar. The EFRAG sustainability reporting pillar now has thirty-one member organisations.

Read more

EFRAG advances its governance reform and the set-up of its sustainability reporting pillar

The composition of the EFRAG Administrative Board is now complete. Hans Buysse will serve as the President of the EFRAG Administrative Board, effective from the end of the mandate of Jean-Paul Gauzès. Georg Lanfermann will serve as Vice-President.

In addition, EFRAG is deliberating on the applications for the Chair and members of its Sustainability Reporting Technical Expert Group. The application deadline for these positions ended on 28 February.

EFRAG is also calling for candidates to enhance its sustainability reporting secretariat. They are currently looking for:

Final Report on Social Taxonomy

The EU Platform on Sustainable Finance published a report on social taxonomy proposing a structure for a social taxonomy within the EU legislative environment on sustainable finance and sustainable governance. The proposed structure consists of three objectives:

  • decent work including for value-chain workers
  • adequate living standards and wellbeing for end-users
  • inclusive and sustainable communities and societies

The structure covers three stakeholder groups of workers, consumers and communities.

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EC sets out strategy to promote decent work worldwide and prepares instrument for ban on forced labour products

The EC is preparing a new legislative instrument to ban products made by forced labour from entering the EU market. This instrument will cover goods produced inside and outside the EU, combining a ban with a robust enforcement framework. It will build on international standards and complement existing horizontal and sectoral EU initiatives, in particular the due diligence and transparency obligations.

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ESMA’s sustainable finance roadmap 2022 -2024

ESMA identified three priorities in its sustainable finance roadmap:

  • tackling greenwashing and promoting transparency
  • building National Competent Authorities’ (NCA) and ESMA’s capacities
  • monitoring, assessing and analysing ESG markets and risks

ESMA intends to address the above priorities with specific actions across the following sectors: investment management, investment services, issuers’ disclosure and governance, benchmarks, credit and ESG ratings, trading and post-trading and financial innovation.

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IFRS Foundation Trustees continue to work towards completing the ISSB composition

The Trustees’ aim is to appoint six more members, in addition to the Chair and Vice-Chair, to establish the quorum of eight members as per the IFRS Foundation Constitutions.

The priority is to publish the exposure drafts based on the prototypes from November 2021 for public comment.

With fourteen ISSB members in total, the recruitment process is expected to end by the third quarter of 2022.

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US SEC addresses climate-related reporting in its statement to FASB’s Agenda Consultation

On 22 February, the US Securities and Exchange Commission (SEC) issued a statement on the Financial Accounting Standards Board’s (FASB) Agenda Consultation from June 2021, addressing climate-related transactions and disclosures.

The SEC notes that there may be opportunities for the FASB to improve on targeted areas of accounting, disclosure, and financial reporting to address investor needs regarding climate-related issues.

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IFRS Foundation signs a Memorandum of Understanding to establish ISSB presence in Frankfurt

The Memorandum of Understanding signed with German public and private sector institutions establishes the seat of the International Sustainability Standards Board (ISSB) and office of the Chair in Frankfurt.

The office will provide key support functions for the ISSB, including the hosting of board meetings, and will act as a hub for the Europe, Middle East and Africa (EMEA) region.

The IFRS previously announced that Montreal will also host key functions of the ISSB and act as a hub for the Americas region.

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VRF asks for feedback on their Integrated Thinking Principles

On December 2021, the Value Reporting Foundation (VRF) published a prototype of its Integrated Thinking Principles. These principles aim to provide a structured approach on creating the right environment within an organization.

The VRF is now seeking feedback through a ten-question survey to shape the next version of the principles. The deadline for submissions is 30 April.

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UK Financial Reporting Council outlines its thoughts on the two sustainability reporting standards prototypes of the Technical Readiness Working Group

The UK Financial Reporting Council (FRC) supports the development of global standards for sustainability reporting and the UK adoption of those standards.

In developing those standards, the FRC recommends that the ISSB:

  • provides stakeholders with an outline of the architecture of the standards
  • considers the four pillars of the Task Force on Climate-Related Financial Disclosures (TCFD) in the context of the overall framework for narrative reporting, and
  • discusses the extent to which governance reporting will be within the scope of the ISSB standards, so to avoid any conflicts with existing local requirements

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.