In a joint letter signed by 16 other organisations, Finance Watch warns the Commission that civil society groups will only support an ambitious first set of sector-agnostic ESRS that closely builds on the EFRAG drafts adopted last November.
Finance Watch has co-signed a letter with 16 organisations to support an ambitious first set of European Sustainability Reporting Standards (ESRS). Following the call from some organisations to decrease the scope of the standards, the letter warns the Commission that any further reduction in the scope, content or coverage of the standards would undermine the credibility of the process, the support of civil society and the development of sector-specific standards.
ESRS are a milestone in corporate reporting towards more consistent and comparable sustainability disclosures. EFRAG’s technical advice to the European Commission provides a sound, holistic and coherent framework to achieve this objective. It was adopted without dissent by the EFRAG Sustainability Reporting Board, following an extensive multistakeholder process that drew on the expertise of all stakeholders.
The draft ESRS are based on existing reporting frameworks and international standards, in particular the Task Force on Climate-Related Financial Disclosures (TCFD). As a result, they are built to be aligned with the forthcoming IFRS Standards on climate on financial materiality and compatible with the GRI standards for impact materiality. In addition, the draft ESRS structure and disclosure requirements cover topics required by the CSRD, including the framework for reporting on climate transition plans, biodiversity and sustainability due diligence.
EFRAG’s technical advice strikes the right balance between ambition and proportionality in defining a limited set of mandatory disclosures that are necessary to comply with other legal requirements of the EU regulatory framework, in particular to meet the information needs of investors and banks.
The compromise reached by EFRAG after lengthy and sometimes difficult discussions represents a careful balance between different views and stakeholder interests.
We therefore urge the Commission to follow EFRAG’s technical advice and we caution against making significant changes at this stage, as this would risk discrediting the process so far and undoing a good compromise. Worse still, it would result in a missed opportunity for sustainability goals and undermine the development of the EU regulatory framework for sustainable finance.