EFRAG and CDP have agreed a collaboration to accelerate the market uptake of the European Sustainability Reporting Standards (ESRS), which will apply to around 50,000 businesses starting January 2024.
Under the agreement, CDP will explore and implement alignment of its disclosure system with the ESRS as EFRAG provides technical expertise, access and guidance.
Supported by EFRAG, which drafted the ESRS, CDP will begin to offer webinars and detailed technical guidance materials to support companies reporting on ESRS data points through CDP.
Currently used by over 23,000 companies, CDP disclosing companies represent two-thirds of global stock market capitalisation and nearly 90% of European market value. Investors, policymakers and others use data from the disclosures made via CDP’s system.
Corporate data on issues beyond emissions is much needed by investors operating in the European Union to meet their own regulatory obligations.
”The standards elaborated by EFRAG in its role as technical advisor to the European Commission will support capital markets to compare companies, reduce greenwashing and redirect capital,” said Patrick de Cambourg, chair of the EFRAG Sustainability Reporting Board.
“And our collaboration with CDP will help to accelerate these standards’ market uptake, building capacity among EU and non-EU businesses alike to use them as regulation comes in.”
The news of EFRAG’s and CDP’s collaboration on the ESRS comes after MEPs last month rejected a resolution calling for limitations to be introduced on the standards, paving the way for their final adoption.
The ESRS are a central component of the Corporate Sustainability Reporting Directive (CSRD). They will apply to all large and listed companies in the EU. From 2028, non-EU companies operating in Europe must also report their impacts using the ESRS or equivalent standards.
The standards cover climate change, pollution, water and marine resources, biodiversity and ecosystems, and resource use and circular economy. They are interoperable with the IFRS S2 climate-related disclosure standard developed by the International Sustainability Standard Board (ISSB) as well as with the Global Reporting Initiative standards.
The ESRS follow a double materiality approach, meaning businesses must report how they expect climate and environmental changes to affect their operations and value creation, as well as on how their business impacts people and planet.
CDP has also recently announced that it will align with the ISSB’s climate standard from 2024. It has also committed to reflecting disclosure frameworks and reporting requirements in other jurisdictions, including those being developed by the SEC in the US and the Taskforce on Nature-related Financial Disclosures recommendations.