European Commission clarifies its amendments to the EFRAG draft standards

European Commission clarifies its amendments to the EFRAG draft standards 

During a public session of the EFRAG Sustainability Board on 14 June 2023, the European Commission (EC) provided some clarifications on its amendments contained in the draft Delegated Act adopting the European Sustainability Reporting Standards (ESRSs) which was opened for comment last Friday.  

Some key take-aways: 

• Removing the mandatory status on Climate Change and other Disclosure Requirements does NOT make these areas voluntary – rather it enforces the materiality approach on all sustainability topics and keeps the whole package intact.  

• Additional phase-in provisions allows companies to start reporting in a compliant manner while they are developing processes to gather the more challenging data. 

• The threshold of 750 employees on certain new phase-in provisions is expected to assist approx. 30,000 companies from the estimated total of 50,000 companies that will be in scope of the CSRD. 

• EFRAG is working on guidance over the materiality process, which appears to be the most challenging area of the CSRD, but emphasized that the materiality assessment must be a robust process to ensure that all needed information is disclosed and what is not needed is not disclosed. 

European Commission adoption of Tax04 

In a closely related action, the EC on Monday 13 June 2023 adopted another Delegated Act (known as Tax04) adding additional activities to the EU Taxonomy and proposing new rules for Environmental, Social and Governance (ESG) rating providers, which will increase transparency on the market for sustainable investments – expected to take effect from January 2024. While some commentators believe the simultaneous application of CSRD and Tax04 is too onerous on reporters, the Commission views this package as building on and strengthening the foundations of the EU sustainable finance framework, of which the CSRD is a key component. 

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