Business Europe warns simplified ESRS could mean just 10% less reporting
Major industry bodies question how meaningful EFRAG’s 57% cuts will be, while KPMG calls for clarification for Wave One reporters.
Business Europe says a headline promise to cut two thirds of the European Sustainability Reporting Standards (ESRS) may only reduce companies’ requirements by 10% in real terms.
The EU’s corporate reporting body, EFRAG, closed a consultation on planned revisions to the ESRS this week.
It has proposed paring back the framework by around 60%, to make it more manageable for companies covered by the Corporate Sustainability Reporting Directive (CSRD).
But key industry groups including Business Europe and Germany’s Deutsches Aktieninstitut have responded to the consultation by questioning how meaningful the cuts would be in practice.
Business Europe said EFRAG’s proposal was “a positive step toward supporting the effective implementation of the CSRD” but was still “largely insufficient for companies”.
“Although EFRAG reports a 57% reduction in mandatory data points, early feedback from preparers indicates that the actual reduction in reporting effort – measured in terms of report length and volume – would likely amount to only 10–20%,” it claimed.
Deutsches Aktieninstitut raised similar concerns, stating that the proposal does “not necessarily translate into a proportional decrease in reporting length and burden” and that many of the changes were “cosmetic without altering the underlying substance of the disclosure requirements”.
Business Europe said the gap between the headline reduction and the reality was partly because many of the indicators that have been retained in the plans are “highly burdensome or difficult to implement in practice”.
It pointed to locked-in emissions (E1-1), traceability and coverage of sites near biodiversity sensitive areas (E4-2), the proportion of employees covered by collective bargaining agreements (S1-8) and adequate wages (S1-9) as some of the most impractical data points still on the list.
Other concerns
Both trade bodies called for removal of a requirement to publish the anticipated financial effects of climate change on companies, with Business Europe arguing that even the least stringent option being put forward by EFRAG would “pose significant risks of legal proceedings if included in financial statements”.
Deutsches Aktieninstitut said the requirement should only be introduced “once a sensible methodology is in place”.
Wave One firms
Consulting giant KPMG noted that many first-wave reporters will be reading the proposed new ESRS guidelines to help them with their next CSRD reports.
It therefore urged EFRAG to better distinguish “clarifications – which may be applied when reporting under the existing ESRS – from other amendments”.
Real Economy Progress recently reported on comments from the head of ESG reporting at shipping company Maersk, saying firms that have already reported using the original ESRS are in “a limbo position” while the revisions are negotiated.
ESMA pushes on transition
The European Securities and Markets Authority stressed the need for the ESRS to provide “sufficient transparency” around corporate transition plans for climate and nature.
“To do so, it is necessary that the ESRS clearly establish what constitutes a transition plan as opposed to a less strategic action plan, and which minimum disclosures are expected in the respective environmental areas,” it wrote in its consultation response.
ESMA said plans to make climate target disclosure requirements more flexible will make it harder for investors to compare the ambition of transition plans.
EFRAG told REP it will publish figures from its consultation next week, with the responses themselves expected to be made public later in the month.