ICGN calls for further changes to European Sustainability Reporting Standards
July 8th, 2023
The International Corporate Governance Network (ICGN) has called on the European Sustainability Reporting Standards (ESRS) to provide more support for investors to help them meet disclosure requirements.
In the current draft proposals, investors are dependent on companies’ disclosures for their own reporting under the Sustainable Finance Disclosure Regulation (SFDR). After a materiality assessment, companies could decide not to disclose elements that investors need for their own reporting, which the ICGN describes as “very problematic”.
The ESRS set the rules for companies to report on sustainability-related impacts, opportunities and risks under the EU’s upcoming Corporate Sustainable Reporting Directive (CSDDD). The CSDDD secured approval from the European Parliament at the start of June 2023.
The network has called on the commission to keep the approach proposed by EFRAG, which includes further stipulations for the disclosure requirements and data points in the ESRS. Under EFRAG’s proposal, anything that directly corresponds to the information needs of other parties to meet their own disclosure requirements under separate pieces of legislation should be mandatory to report.
However, the ICGN also welcomed the inclusion of other suggested changes.
These changes include a reduction in the number of disclosure requirements by 40% and the number of individual data points by 50%. This was suggested by the ICGN in August 2022, when the organisation expressed concerns over the complexity and granularity of the draft ESRS standards.
The ICGN also welcomed the move to give a more central role to the materiality assessment, which it describes as “a fundamental and well-understood concept in financial reporting”.
In a statement, the ICGN said: “Investors have been calling for comparable, reliable and verifiable corporate sustainability disclosures in order to make informed stewardship, investment and risk management decisions, and for their own reporting. Therefore, the ICGN supports the objective of the Corporate Sustainability Reporting Directive (CSRD).”
The commission expects to adopt the standards in the second quarter of 2023.
Last Updated: 7 July 2023