ESRSs expected to be implemented before CSRD reporting requirements.
Standards-setting body the Global Reporting Initiative (GRI) has committed to aligning its voluntary reporting framework with the EU’s sustainability reporting standards. Under a new cooperation agreement, the GRI will also work with the European Financial Reporting Advisory Group (EFRAG) Project Task Force on European sustainability reporting standards (PTF-ESRS) on development and global convergence.
“The EU and GRI are both committed to standards that are multi-stakeholder inclusive and address the impacts organisations have on the environment, society and the economy, based on international and authoritative instruments,” said Judy Kuszewski, Chair of the GRI’s Global Sustainability Standards Board.
The ESRSs are expected to be published by October next year.
Both organisations will share technical expertise to build the standards, assisting the European Commission in improving corporate transparency on sustainability in support of the European Green Deal. Where possible, they will ensure there is collaboration with other developing global standards, such as the work led by the IFRS Foundation, EFRAG said.
While the IFRS Foundation aims to focus on enterprise value, EFRAG and GRI will be building standards incorporating a double materiality lens.
“European sustainability reporting standards should build on and contribute to the progress of existing standards and frameworks that are widely used by companies […] this Statement of Cooperation between EFRAG and GRI [is an] important step towards promoting convergence between European and global sustainability reporting standards,” said Sean Berrigan, Director General for Financial Stability, Financial Services and Capital Markets Union for the European Commission.
The EU’s sustainability reporting process also aims to be highly digitised, with a proposal for a Single European Access Point made by the Commission expected “very soon”, according to Ugo Bassi, Director of Financial Markets at the European Commission’s directorate general for financial services (DG FISMA).
“Raising the bar” for corporate accountability
Requirements for companies to report in line with new ESRSs were recently set out under the proposed Corporate Sustainability Reporting Directive (CSRD), previously known as the Non-Financial Reporting Directive (NFRD).
On 21 April, the Commission adopted a legislative proposal for the CSRD, which will require 50,000 firms to provide a non-financial statement on a series of ESG-related factors, in line with the Taxonomy Regulation. CSRD is expected to apply from 2024 (reporting on 2023 activities), with the Commission asking the GRI and PTF-ESRS to ensure that the ESRSs are published in line with this deadline.
GRI Chairman Eric Hespenheide noted that CSRD has the potential to “raise the bar for corporate accountability and transparency, in Europe and beyond”.
“This agreement is the first step towards establishing a long-term strategic collaboration on the co-construction of standards which meet the requirements of the CSRD to become legally binding in the EU but also can be incorporated in the voluntary global standards from GRI. Standard development will therefore be guided by both EFRAG’s due process and the GRI due process,” he said.
Patrick de Cambourg, Chair of EFRAG’s PTF, previously told ESG Investor that the ESRSs need to be introduced before firms are required to report on their 2023 activities as they will provide a strong foundation for these disclosures.
EFRAG first published two reports in March, outlining the role it would play in the formulation of ESRSs. The first report proposed a roadmap for the development of the standards, whereas the second outlined the internal reforms to EFRAG’s governance structure to ensure the body would be the best group to handle the design, implementation and management of any such standards.
The European Commission also updated its Sustainable Finance Strategy this week, outlining areas of future focus, including: regulating third-party ESG data providers and ratings agencies; research into developing sustainability reporting standards for SMEs; a proposal for the European Green Bond; and the adoption of a delegated act based on Article 8 of the taxonomy.