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It has been a busy few months for updates on sustainability reporting and due diligence requirements. There have been a number of useful updates that companies should be aware of since our last sustainability reporting update in August 2024. In this article, we have set out a brief overview of some of the key publications.
Updates relating to the Irish implementation of the Corporate Sustainability Reporting Directive
1. CSRD No.2 Regulations published
On 4 October 2024, the second Irish regulations implementing the Corporate Sustainability Reporting Directive (CSRD) were published, the European Union (Corporate Sustainability Reporting) (No. 2) Regulations 2024 (the CSRD No. 2 Regulations). The CSRD No. 2 Regulations, which were signed by the Minister for Enterprise, Trade and Employment on 1 October 2024, make a small number of technical clarifications to the first regulations, the European Union (Corporate Sustainability Reporting) Regulations 2024 (the CSRD Regulations).
2. FAQs on Irish CSRD Regulations published
On 1 November 2024, the Department of Enterprise, Trade and Employment published a Frequently Asked Questions (FAQs) document relating to the CSRD Regulations. The FAQs address the following sections:
IAASA updates
1. IAASA adopts ISAE (Ireland) 3000 for the assurance of sustainability reporting
On 30 September 2024, the Irish Auditing & Accounting Supervisory Authority (IAASA) adopted the International Standard on Assurance Engagements (Ireland) 3000 (ISAE 3000).
By way of background, CSRD requires assurance on sustainability information reported by companies and provides that the European Commission (the Commission) is to adopt limited assurance standards that shall apply throughout the EU by 1 October 2026, against which assurance will take place. Until then, member states can set their own national assurance standards.
IAASA made amendments to the international standard to ensure that it applies to sustainability assurance in engagements in Ireland and that sustainability assurance providers are subject to appropriate ethical and quality management requirements. These requirements are the International Code of Ethics for Professional Accountants issued by the International Ethical Standard Board for Accountants and International Standard on Quality Management (Ireland) 1 (ISQM 1).
ISAE (Ireland) 3000 requires auditors to comply with ISQM 1. The following updates have been made to ISQM 1:
ISAE (Ireland) 3000 applies to assurance reports issued on or after 15 December 2024 and an evaluation of the updated system of quality management must be performed within one year of this date.
2. IAASA publishes annual Observations paper
On 8 October 2024, the IAASA published its annual Observations paper which addresses sustainability reporting matters and sets out the approach the IAASA will take in conducting sustainability statement examinations in 2025. We have set out below the key takeaways from the Observations paper:
EU sustainability reporting and due diligence updates
1. EFRAG publishes the ESRS Set 1 XBRL Taxonomy
On 30 August 2024, the European Financial Reporting Advisory Group (EFRAG) published its XBRL Taxonomy for ESRS Set 1, which enables the digital tagging of ESRS statements. Additionally, EFRAG published the XBRL Taxonomy for Article 8 disclosures that the Commission requested EFRAG to prepare.
By way of background, EFRAG was tasked by the Commission to develop the digital taxonomy for the European Sustainability Reporting Standards (ESRS). The digital taxonomies enable the marking up of sustainability reporting in machine-readable XBRL format and the XBRL taxonomy released by EFRAG represents the correct digital transposition of the human-readable ESRS Set 1, in the view of EFRAG.
The XBRL taxonomy will form the basis for the European Securities and Market Authority (ESMA) to develop regulatory technical standards for tagging the ESRS sustainability statement.
To complement the XBRL taxonomy packages, there is a document entitled 'Explanatory Note and Basis for Conclusions'. The document includes technical options considered for the preparation of the taxonomies and includes illustration of the resulting reporting in machine-readable format to support the implementation of ESRS Set 1 Taxonomy.
2. Commission warns 17 Member States over failure to implement CSRD
On 26 September 2024, the Commission advised that it sent a letter of formal notice to 17 Member States (Belgium, Czechia, Germany, Estonia, Greece, Spain, Cyprus, Latvia, Luxembourg, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia and Finland) for failing to notify their national measures transposing fully CSRD. The transposition deadline was 6 July 2024.
3. EFRAG and TISFD sign cooperation agreement with the aim of advancing social-related financial disclosures
On 27 September 2024, EFRAG and the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) Secretariat signed a cooperation agreement aimed at advancing the development and adoption of social related financial disclosures.
This collaboration seeks to promote global disclosure frameworks that enable businesses and financial institutions to understand and report on their impacts, dependencies, risks, and opportunities related to people.
4. Joint Committee of the ESAs to focus on sustainability disclosures in 2025
On 7 October 2024, the Joint Committee of the European Supervisory Authorities (ESAs) published its Work Programme for 2025. Particular emphasis is placed on promoting sustainability in the EU financial system with joint work planned to provide further guidance on sustainability disclosures including to:
The programme also highlighted that joint guidelines on high-level principles to carry out climate stress testing under CRD6 and Solvency II will be developed by January 2026.
5. Sustainability statements listed in the European Common Enforcement Priorities statement
On 24 October 2024, ESMA issued its annual European Common Enforcement Priorities (ECEP) Statement for 2024 corporate reporting, setting out key issues relating to the CSRD as areas for scrutiny over the next year for ESMA and national European enforcers.
Sustainability statements has been listed as an area of focus for 2025, with ESMA and European enforcers focusing on the following topics:
To view the ECEP statement in full, see here and to view the press release in full, see here.
6. EU Deforestation Regulation updates
On 7 November 2024, a stronger international cooperation framework to support global stakeholders, Member States and third countries in their preparations for the implementation of the EU Deforestation Regulation (EUDR) was published in the Official Journal of the EU (the OJ), and on 13 November 2024, the Commission’s guidance documents on the EUDR were published in the OJ.
Given feedback received from international partners about their state of preparations, the Commission proposed a Regulation amending the EUDR as regards the date of application. On 14 November 2024, the European Parliament (the Parliament) agreed to this postponement as well as other amendments.
Amendments adopted include:
In terms of next steps, the Parliament decided to refer this file back to committee for interinstitutional negotiations. In order for these changes to enter into force, the agreed text will have to be endorsed by both the European Council (the Council) and Parliament and published in the OJ.
7. Commission publishes Taxonomy Regulation FAQs
On 8 November 2024, the Commission published a Notice in the OJ.
The Commission Notice contains FAQs relating to the Disclosures Delegated Act under Article 8 of the EU Taxonomy Regulation on the reporting of taxonomy-eligible and taxonomy-aligned economic activities and assets.
8. CDP and EFRAG announces cooperation on sustainability reporting
On 12 November 2024, EFRAG and CDP announced extensive commonality and interoperability between CDP disclosures and the ESRS.
Provisional mapping by the organisations revealed substantial commonality between CDP's climate questionnaire and the ESRS climate standard (ESRS E1). This high level of commonality benefits companies both ways:
9. FAQs on EU corporate sustainability reporting rules
On 13 November 2024, the Commission's FAQs regarding the rules forming part of the EU sustainable finance framework were published in the OJ. The FAQs were initially published as a draft notice on 7 August 2024.
The FAQs cover the following key sections:
10. Council adopts Regulation on prohibition of products made with forced labour
On 19 November 2024, the Council adopted a regulation enabling the EU to prohibit the sale, import, and export of goods made using forced labour.
By way of background, the regulation establishes a structured framework for prohibiting the use of forced labour in the production of EU goods and within supply chains. Member state authorities and the Commission will be able to investigate products suspected of being made with forced labour. If a product is found to have been manufactured using forced labour within its supply chain, it cannot be made available or placed on the EU market or exported from the EU market. If such a product is already on the EU market, the economic operator responsible must promptly remove it.
The Council's adoption of the regulation represents the last step in the decision-making procedure. The regulation will enter into force on the day following its publication in the OJ. It will apply three years after the date of entry into force.
With thanks to Caitlin Murphy for her assistance in the preparation of this article.
For further information on any of these updates, please contact Jill Shaw, ESG & Sustainability Lead or any other member of the ALG ESG & Sustainability team.
