The European Commission has launched a consultation on its planned new sustainable reporting standards.
The standards, known as ESRS, outline how companies must disclose environmental, social and governance information to their investors via the Corporate Sustainability Reporting Directive (CSRD).
They’ve been under redevelopment for the past year as part of a commitment by the EU to reduce the reporting burden for European businesses.
Now, the Commission has unveiled its plan for the next iteration of ESRS, and opened it up for feedback until 3 June.
It has resisted intense last-minute pressure to rewrite the rules to align more directly with those of the International Sustainability Standards Board (ISSB).
Last month, lobbyists put a proposal on the table that reflected public comments made by ISSB’s chair, Emmanuel Faber, to the European Parliament. Faber had suggested that, if the EU changed “two small items” in ESRS, the ISSB would deem companies’ CSRD reports to be automatically aligned with its global standards, which are being adopted into regulation by a number of other key markets.
The first change ISSB asked for would have permitted companies to use their ISSB disclosures as the basis of their CSRD reports, and the second was for ESRS to prioritise financially material sustainability information over details about a business’s environmental and social impacts.
The Commission was rumoured to be considering splitting ESRS disclosures into separate ‘financial’ and ‘non-financial’ sections in order to satisfy the demands, but Wednesday’s announcement reveals that it hasn’t, and European companies will still have to undertake additional work in order to comply with both sets of standards.
The latest draft has significantly reduced the reporting burden under CSRD, though, more than halving the number of data points, and introducing major reliefs for businesses still in scope of the rules.
As expected, many will now initially be allowed to omit information about how the sustainability risks, opportunities and impacts they identify in their reports are expected to impact them financially.
Doubling down
It’s the second time this week the EU has doubled down on fundamental parts of its sustainability package in the face of intense pressure from industry and national governments.
On Monday, the Commission released the conclusion of a review into the bloc’s deforestation rules, known as EUDR.
Many observers expected it to agree to reopen the law, which has been under sustained attack from lobby groups and has already been delayed twice.
However, the Commission revealed it was sticking to the current December deadline for implementation.
It committed last week to a broader “regulatory deep cleaning” to make Europe’s laws easier to understand, apply and enforce.
The Commission said it would address inconsistent and overlapping requirements, starting with 12 priority areas, including financial services, climate, energy and the environment.
