‘We have been too technical’: EFRAG head says attempt at clear EU reporting rules has backfired
De Cambourg urges companies not to “obscure” reports with unnecessary information
The head of the advisory body for Europe’s Sustainable Reporting Standards (ESRS) has told companies not to be “scared” of their complexity.
Patrick de Cambourg said there was “a possible misunderstanding about the scary number of data points” included in ESRS, which are the standards firms must use to report under the EU Corporate Sustainability Reporting Directive (CSRD).
“We have been too technical at EFRAG,” said de Cambourg, the chair of EFRAG’s sustainability reporting board.
“We wanted to help… so we produced a document that is very granular, and now we have the back-fire from that.”
The EU is under mounting pressure to review the rules, with companies complaining about the level of detail they have to provide under ESRS. Some lobby groups have suggested firms are required to collect information more than 1,000 data points in order to comply with CSRD.
At an event hosted by the European Commission on Friday, de Cambourg joined the growing chorus of experts insisting this is not the case.
“Report only what is material,” he told the audience. “Don’t obscure reports with lots of information of a very granular and unnecessary nature.”
Speaking at the same event, John Berrigan, head of the Commission’s finance unit, said ESRS should be applied “with pragmatism and common sense” – the same message given by the Commission’s Tom Dodd during last month.
“ESRS do not require reporting to the Nth degree of granularity, nor do they require reporting about each and every supplier in the value chain,” Berrigan said.
De Cambourg explained that EFRAG’s guidance was detailed because “we wanted to explain in a granular manner how best to report”.
“Plus, we had a clear agreement with the Commission from Day One to embed all the other regulations in terms of data points,” he continued, saying there were more than 130 additions as a result.
“So don’t be scared – it is the aggregation of that, plus the narrative nature that is creating this sense of data points that might be considered as a bit too much.”
De Cambourg said 70% of sustainability information is of a narrative nature, a point echoed by fellow panellist Filip Gregor, head of responsible companies at non-profit law firm Frank Bold.
“There is a belief that everything must be put into numbers, but that’s not quite true,” Gregor said, adding that “sometimes qualitative reporting is much more meaningful than coming up with unreliable numbers”.
“This is not something that the European standards can prescribe: [they can’t say] ‘don’t report metrics’ or anything,” Gregor continued. “So you will not find a clear hook for it.
“But if you read the first standard, ESRS1, including the application requirements, you will see kind of a soft instruction about how to think about these metrics.”
EFRAG has received around 700 queries from confused entities over the past year, of which they have managed to respond to around 65% so far.
De Cambourg said the body will take a break from issuing further explanations until March, to “avoid disrupting mechanisms” as companies prepare for their year-end reports.