Complying with the EU Corporate Sustainability Reporting Directive – looking ahead to additional guidance and standards

In this post, we discuss EFRAG’s ambitious proposed sustainability reporting work program for 2024 and beyond.

EFRAG (previously known as the European Financial Reporting Advisory Group) is an independent, multi-stakeholder advisory body, majority funded by the EU. EFRAG provides technical advice to the European Commission on the European Sustainability Reporting Standards under the Corporate Sustainability Reporting Directive. The ESRS specify the information required to be reported under the CSRD.

Guidance on the ESRS

EFRAG has established a Q&A platform to educate stakeholders about ESRS requirements and help them in implementing the standards. The link for submitting questions is now active. 

Depending on the type of question, EFRAG will issue one of the following:

• Clarifications: If the content of an ESRS already provides an appropriate answer without adding illustrations or introducing new guidance. 
• Rejections: If the (1) question is addressing an issue that is peculiar to the submitter or is not of widespread interest for ESRS application, (2) issue is too broad to be answered effectively or (3) content of the submission is non-conclusive. 
• Implementation guidance: EFRAG will issue implementation guidance (EFRAG IG) to illustrate how the ESRS requirements may be implemented, without introducing new provisions or amending the ESRS requirements.
• Possible ESRS amendments: If new requirements or a modification of existing requirements are needed to address the issue raised by the question because it is not covered by an ESRS. Possible amendments will be issued as EFRAG advice to the European Commission. It will be up to the Commission whether to amend the ESRS. EFRAG has indicated that it does not expect to issue proposed amendments in 2024 unless very urgent matters arise. 

Clarifications, rejections and implementation guidance will be non-authoritative.

Clarifications and rejections

EFRAG expects to publish a series of clarifications and rejections each quarter in 2024.

Implementation guidance

In the second quarter of 2023, EFRAG started drafting the first two pieces of implementation guidance, which address materiality assessments (EFRAG IG 1; discussed in our post here) and the value chain (EFRAG IG 2). These EFRAG IG are expected to be finalized in the first quarter of 2024. EFRAG expects to issue approved draft versions before the end of 2023, after which they will be open for a 30-day public feedback period. 

The ESRS implementation Q&A process is expected to result in additional EFRAG IG. Questions will be grouped by issue so they can be more effectively addressed in new EFRAG IG. Depending on their nature, they will be issued either as an addendum to an already existing EFRAG IG or as standalone narrow-scope EFRAG IG. 

In 2024, EFRAG will work on other EFRAG IG documents, for example relating to disclosure requirements in topical standards. EFRAG also may decide, beyond the Q&A, to in the future develop EFRAG IG for cross-cutting and topical ESRS. 

ESRS datapoint inventory

In December 2023 or early 2024, EFRAG will release an inventory in XLS of the ESRS datapoints to assist undertakings and users in their gap analysis.

Voluntary reporting standard for companies not subject to the CSRD

Many entities that are not required to report under the CSRD will nevertheless receive requests for sustainability information from customers, banks, investors or other stakeholders. In its recent SME Relief Package, the European Commission indicated that it will ensure that SMEs have a voluntary, simple and standardized methodology to report on ESG issues to reduce the burden on them and facilitate their access to sustainable finance. 

EFRAG is developing a voluntary reporting standard for use by non-listed SMEs to enable them to respond to requests for sustainability information in an efficient and proportionate manner. The standard is intended to serve as a market-accepted approach for meeting the information needs of lenders, other investors and large companies that have SMEs in their value chains. The voluntary reporting standard will not be binding (it will not be adopted by the Commission as a delegated act).

An exposure draft of the voluntary standard will be issued in the first quarter of 2024. It will be open for a four-month public consultation.

ESRS XBRL taxonomy

In the first quarter of 2024, EFRAG will release for a 60-day consultation the XBRL taxonomy of the ESRS issued in July. EFRAG will issue its technical recommendation on the taxonomy to the European Commission in the second half of 2024. 

Next steps on sector-specific ESRS and ESRS for non-EU companies

In a post last week, we discussed the European Commission’s proposal to push back the deadline for the adoption of sector-specific standards and reporting standards for non-EU companies under the CSRD. The Commission has proposed pushing back by two years the adoption of these ESRS, from June 30, 2024 to June 30, 2026. EFRAG’s work plan is aligned with the Commission’s new timetable.

Sector-specific ESRS

EFRAG intends to deliver its technical advice on sector-specific ESRS by November 2025, with public consultations to occur in late 2024 or early 2025. EFRAG expects to ultimately issue approximately 40 standards. These will consider the material issued by SASB, the GRI standards and relevant sector reporting guidelines and regulation.

In the first half of 2024, EFRAG expects to finalize exposure drafts relating to (1) the general approach to sector ESRS, (2) the ESRS sector classification approach, based on EU NACE codes for economic activities, and (3) draft ESRS for oil and gas (covering activities from upstream to downstream) and mining, quarrying and coal. 

This quarter, EFRAG will start the standard setting research process for three standards dedicated to financial institutions – banking, insurance and capital markets. In 2024, EFRAG plans to complete the standard setting research and drafting of three exposure drafts, which will be put in consultation in 2025. 

Standard setting research is ongoing for agriculture-farming-fishing, road transport, food and beverage, motor vehicles, energy, production-utilities and textile-accessories-footwear-jewellery.

Depending on the availability of resources and EFRAG capacity, EFRAG may put in consultation in 2024 one or more additional sector-specific ESRS exposure drafts.

Non-EU company ESRS

EFRAG intends to deliver its advice to the European Commission by November 2025 at the latest. The consultation on an exposure draft will start in the last quarter of 2024 or the first quarter of 2025.

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