EU Financial Regulator Seeks Input On Reduced Sustainability Reporting Requirements
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On April 8, the European Financial Reporting Advisory Group announced a public call for input on the proposed rewrite of sustainability reporting standards. The request is in response to a letter from Maria Luís Albuquerque, the EU Commissioner for Financial Services and Investments, asking for updated recommendations to comply with the current proposal. EFRAG was given until April 15 to draft a timeline with a target completion deadline of October 31. Participants have until May 6 to fill out the online survey.
As part of the European Green Deal, the EU pushed through a series of regulations aimed at controlling businesses' climate related activities. In 2022, the EU adopted the Corporate Sustainability Reporting Directive to create requirements for businesses to report greenhouse gas emissions and other environmental, social, and governance actions. The CSRD called for the drafting of European Sustainability Reporting Standards to create the regulatory framework for reporting. That responsibility was delegated to EFRAG.
EFRAG released the first round of ESRS in late 2022. The Commission officially adopted them in July 2023 and EFRAG was tasked with drafting sector specific and non-EU company ESRS. However, companies struggled with implementing the first ESRS, forcing the Commission to delay further development by EFRAG, shifting focus to drafting additional guidance.
In the letter sent on March 25, Albuquerque stated, 'as you will be aware, on 26 February the Commission adopted a first 'omnibus' package of proposals to simplify EU rules, boost competitiveness, and unlock additional investment capacity. You will also have seen that, as part of this initiative, we propose to adopt a delegated act to revise and simplify the existing European Sustainability Reporting Standards (ESRS).'
While the final adoption of reforms to the CSRD in the Omnibus Simplification Package are still in the early stages of consideration by the Parliament, at the behest of the Commission, EFRAG is moving forward with the rewrite of the ESRS. In the statement calling for public input, the regulator stated:
"EFRAG wishes to gather public input from all relevant stakeholders in relation to potential revisions, as well as feedback from the first wave of preparers who implemented the standards in their 2024 sustainability reports. Input is expected on the basis of an online questionnaire.
'The public call for input aims to gather input on the key areas of simplification identified in the Explanatory Memorandum of the Omnibus proposal, including: ESRS mandatory datapoints that are least important or problematic for general-purpose sustainability, per each Disclosure Requirement (with separate consideration given to cross-cutting, environment, social and governance matters); suggestions on how to modify the ESRS provisions that are deemed unclear; suggestions on how to improve consistency with other EU legislation; suggestions on how to improve the ESRS provisions on materiality to ensure that undertakings report only material information, do not report unnecessary information and do not dedicate excessive resources to the materiality assessment process; suggestions on how to simplify the structure and presentation of the standards; suggestions on how to further enhance interoperability with global sustainability reporting standards; and any other modifications that could simplify the ESRS without compromising their role in supporting the Green Deal.'
The call for input is limited to companies based in the European Union that are required to meet sustainability reporting requirements. Participants have until May 6 to fill out the online survey.
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