Proposed European sustainability reporting standards are here

Our key takeaway: We described last year the European Commission’s plans for a Corporate Sustainability Reporting Directive (CSRD) which would reform the EU Non-Financial Reporting Directive (NFRD). We discussed that the European Financial Reporting Advisory Group (EFRAG) would develop new European sustainability reporting standards to underpin the Corporate Sustainability Reporting Directive (CSRD). These reporting standards are referred to as EU Sustainability Reporting Standards (ESRS). The time has come, and EFRAG has released the draft standards for consultation. Take a look and feed back – you have until 8 August 2022.

The European Financial Reporting Advisory Group (EFRAG) has released the following: ‘Cover Note for Public Consultation: Draft European Sustainability Reporting Standards’ (April 2022):

• Consultation: The public consultation is focused on three things: the overall substance of the draft standards (whether the proposed architecture, the implementation of the reporting principles and the overall content of each draft work), the timing for and possible options for prioritising / phasing-in the implementation of the reporting standards, and the adequacy of the proposed disclosure. The consultation is open until 8 August 2022, and people can access the feedback survey online (here for the link to sections 1 and 2 of the public consultation, and here for the link to section 3 of the public consultation.)
• Areas covered by the sustainability reporting standards: The proposed reporting standards are organised into four themes. First, the cross-cutting reporting standards (which include general principles; and general, strategy, governance and materiality assessment disclosure requirements). Second, the environmental reporting standards (which cover climate change; pollution; water and marine resources; biodiversity and ecosystems; and resource use and circular economy). Third, the social reporting standards (which cover own workforce; workers in the value chain; affected communities; consumers and end-users). Fourth, the governance reporting standards (which include governance, risk management and internal control; and business conduct).
• UNGPs as a foundation, especially for grievance mechanisms: Several of the standards use the UN Guiding Principles on Business and Human Rights as a core reference point. For example, ESRS Standard 1 on “Own Workforce” establishes that “[t]he objective of the [draft] Standard is also to ensure that the reporting requirements enable undertakings to disclose alignment with international and European human rights instruments and conventions, including the International Bill of Human Rights, the UN Guiding Principles on Business and Human Rights.” In particular, companies describing the effectiveness of their grievance channels for their own employees, for workers in the value chain, for affected communities, and for consumers and end-users “may be guided by […] questions based on the ‘effectiveness criteria for non-judicial grievance mechanisms’” as outlined in Principle 31 of the UNGPs. 

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