Simplifying sustainability reporting – updated draft of ESRS standards published

In line with the EU's Omnibus package, EFRAG, which develops European sustainability reporting standards, has published drafts of updated standards that will bring changes to sustainability reporting.

In addition to the scorching heat of July, the hot topic of the summer has been the eagerly awaited draft of ESRS standards. In line with the EU’s Omnibus package, EFRAG, which develops European sustainability reporting standards, has published drafts of updated standards that will bring changes to sustainability reporting. The aim of updating the standards is to simplify their requirements and reduce the reporting burden on companies without compromising the ambition and ultimate purpose of reporting – promoting transparency and sustainable development in sustainability reporting.

Highlights of the proposed changes to the standard:

• The number of mandatory data points has been reduced by more than half, and the total number of data points will decrease by 68 percent. However, it should be noted that the reduction in the number of data points has been achieved in part by combining them – the final reporting burden will likely only become apparent when the new standards are applied.
• The removed data points include both narrative descriptions and numerical indicators. The aim is to focus reporting more on information that is relevant to companies, and the information to be reported is determined according to relevant sub-topics.
• Repetition has been reduced, particularly between general information (ESRS 2) and topic-specific standards. References within the sustainability report are also encouraged more than before §to reduce unnecessary repetition in reports.
• Efforts have been made to improve the readability and comprehensibility of the standards by simplifying and clarifying them. A welcome change is the placement of application requirements in connection with disclosure requirements.
• Efforts have been made to simplify the double materiality assessment, and the definition of positive impacts, for example, has been clarified. The sub-topic level has been removed, and sub-topics have been included in the main topics.
• Facilitations have been proposed for reporting economic impacts, and reporting has been centralized in the ESRS 2 standard, with the exception of the E1 standard.

The public consultation on the updates to the standards began when the drafts were published and will end at the end of September. The final standards are to be submitted to the European Commission by the end of November. Once approved, the revised standards will enter into force when they are published in the Official Journal of the European Union.

It will be interesting to see whether the reductions in reporting requirements proposed by EFRAG will affect the decisions on the thresholds for companies subject to CSRD reporting obligations. In the published proposals, a threshold of up to 5,000 employees has been suggested. Autumn will certainly be very interesting in the field of sustainability reporting, as companies must plan their reporting even though the final changes to the standards and the CSRD Directive are not yet clear.