In a joint letter sent on 4 April 2023, Finance Watch and partners urge the European Commission to pursue the development of the second set of European Sustainability Reporting Standards (sector-specific standards) and to preserve the integrity of the first set (cross-cutting standards) in its upcoming delegated acts
In this letter, organisations representing investors, civil society, sustainable companies, trade unions and multi-stakeholder alliances, including members of the EFRAG Sustainability Reporting Pillar voice their concerns regarding the decision of the European Commission to postpone the development of the sector-specific sustainability reporting standards. The letter makes the following important points:
1 The sector-specific standards remain critically important and should in practice reduce the complexity of the reporting process for companies in distinct industries by specifying what information is material in relation to concrete topics. We would like to stress that:
- It is necessary to maintain continuity in the development of the sector-specific standards and achieve a consensus on the priority standards in order to have a less pressured and more thoughtful process, taking advantage of, and without prejudice to, the planned delay to their ultimate adoption.
- The timeline needs to be clarified for the first two sector-specific standards on mining and oil and gas, which are already at an advanced stage of development. In particular, the oil and gas sector plays a critical role in climate transition.
- EFRAG should be provided with sufficient means to effectively carry out this task.
2 It is of utmost importance to us that the Commission adopts the sector-agnostic standards as agreed upon by the EFRAG SRB with as minimal changes as possible.
- The CSRD already includes a phase-in application for listed companies with less than 500 employees, for non-listed companies, and for listed SMEs. These provisions need to be respected.
- Excluding or postponing individual environmental or social standards would undermine the overall integrity and logic of the sector-agnostic standards and fail to recognise the interconnectedness of the full range of sustainability topics in the CSRD. These standards are also important for financial market participants’ ability to meet their existing reporting obligations.
- It is important to note that the sector-agnostic standards provide mandatory indicators primarily for climate and own workforce, and that the standards do not include any indicators on the value chain, except for greenhouse gas emissions.
- The EFRAG SRB carefully considered which disclosures might require extra time. Appendix D of the ESRS 1 already includes a list of disclosure requirements which were suggested to be phased in. We recommend that the European Commission follows the near unanimous SRB recommendation to that end.
- The list of phased-in disclosures includes financial effects and their quantification. These are essential – even though they are delayed – in order to preserve the double materiality approach required by the CSRD.