Sector agnostic
EFRAG was appointed as technical advisor to the European Commission for the development of draft sustainability reporting standards under the Corporate Sustainability Reporting Directive (CSRD). The CSRD that requires companies within its scope to report using a double materiality perspective in compliance with European Sustainability Reporting Standards (ESRS) adopted by the European Commission as delegated acts.
The EFRAG Sustainability Reporting Board (EFRAG SRB), advised by the EFRAG Sustainability Reporting Technical Expert Group (EFRAG SR TEG) approved twelve draft standards for release to the European Commission on 22 November 2022. The European Commission adopted the Delegated Act on the first set of European Sustainability Reporting Standards (ESRS) on 31 July 2023 (press announcement, Q&As webpage & implementing and delegated acts – CSRD webpage). Adoption of ESRS by Delegated Act is mandated by the co-legislators in the Corporate Sustainability Reporting Directive (CSRD - Directive (EU) 2022/2464) adopted in December 2022.
Sector-specific ESRS
As part of its mandate granted by the CSRD to provide technical advice to the EC on ESRS, EFRAG is tasked to develop a set of sector-specific draft ESRS. This will be multi-year exercise.
EFRAG is working on multiple standards including 'Sector Classification and approach to standard setting for sectors' as well as the following sector standards that are at varying degrees of progress:
- Mining, quarrying and coal mining,
- Oil and gas,
- Road transportation,
- Motor vehicles,
- Textiles, accessories, footwear, jewellery,
- Energy production and utilities,
- Food and beverages,
- Agriculture, farming and fisheries, and
- Financial institutions, i.e. banking, capital markets and insurance.
In March 2023, the EC asked EFRAG to prioritise work related to the implementation support and so less time with SR TEG and the SRB have been schedules.
SMEs
Similarly, EFRAG is also mandated by the CSRD to develop a set of sector-agnostic draft ESRS for listed small, medium enterprises (LSME in short).
EFRAG was also requested to develop a proposal for the adoption of voluntary sustainability reporting standard that may apply to small and medium size undertakings that are not falling in the scope of CSRD. This standard is not legally binding but aim to be consistent with the CSRD by applying the ESRS disclosure principles with the highest degree of proportionality and simplification. The need to develop voluntary reporting standards for medium-sized enterprises was identified by the EU Commission Impact Assessment accompanying the CSRD in 2021.
Implementation support
EFRAG supports implementation of the sector agnostic ESRS as published in the Official Journal in December 2023 as requested by the European Commission. Such support consists of the publication of Implementation Guides and the Q&A platform.
Taxonomy
As mandated by the CSRD, EFRAG is developing a digital taxonomy to tag reported information in accordance with ESRS. This includes creating XBRL taxonomies for ESRS adopted by delegated act and Article 8 of the EC Taxonomy Regulation, as well as for LSME ESRS, starting after its expected submission in mid-November 2024.
The XBRL sustainability taxonomies will enable digital tagging in the ESEF format.
ISSB consultations
In the context of being Europe's voice on corporate reporting, EFRAG aims to influence the sustainability activities of the IFRS Foundation. Therefore, EFRAG provides comment letters on exposure drafts and requests for information by the ISSB to contribute to the international standard setting process with an aim to facilitate and ensure interoperability so that duplication in reporting and unnecessary burdens for companies are avoided.
Interoperability
EFRAG ensures successful development and implementation of ESRS that are interoperable with the international standards of the ISSB and GRI. This is pursued by interacting closely with the ISSB and GRI and contributing to their international standards (fostering maximum feasible interoperability to avoid duplication in reporting and unnecessary burden for European companies). The ultimate objective is that companies applying ESRS will be in compliance with other international standards (e.g., ISSB standards and GRI standards) on the same topics.
