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May was a busy month for updates on sustainability reporting and due diligence requirements. As we await the publication of the highly-anticipated national implementing legislation for the Corporate Sustainability Reporting Directive (CSRD), there have been a number of useful updates that companies should be aware of since our last sustainability reporting update in February 2024. We have set out a brief overview of some of the key updates below.
Interoperability guidance published
On 2 May 2024, the IFRS Foundation and the European Financial Reporting Advisory Group (EFRAG) jointly issued their long-awaited interoperability guidance. The guidance aims to facilitate compliance with the requirements of both sets of standards they have prepared, being the European Sustainability Reporting Standards (ESRS) and the standards issued by the International Sustainability Standards Board under the umbrella of the IFRS Foundation.
The ESRS contain 12 specific standards that companies that fall within scope of the CSRD are required to consider. Two cross-cutting standards and 10 topic-specific standards across environmental, social and governance (ESG) topics. In contrast, there are currently only two International Sustainability Standards Board (ISSB) standards: IFRS S1 ‘General Requirements for Disclosure of Sustainability-related Financial Information’ and IFRS S2 ‘Climate-related Disclosures’.
The collaborative guidance focuses primarily on the interoperability of climate-related reporting and is split into four sections:
This joint interoperability guidance describes the alignment of disclosure requirements. It sets out information that an entity starting with each set of standards needs to know to enable compliance with both, ensuring interoperability between them.
Commenting on the guidance, Commissioner for Financial Services, Financial Stability and Capital Markets Union, Mairead McGuiness, said:
“I welcome today’s guidance that recognises the Commission’s sensible approach to sustainability reporting, and a commitment to ensuring a very high degree of alignment between EU and international sustainability reporting standards. It is important that reporting frameworks in different jurisdictions are interoperable with each other to reduce the reporting burden for EU companies.”
Global Reporting Initiative: New resource on CSRD
On 15 May 2024, the Global Reporting Initiative (GRI) with support from the CSRD Rapporteur, Pascal Durrand, co-hosted a ‘CSRD: Implementation and Beyond’ event at the European Parliament in Brussels. The event focused on how to implement the CSRD into national regulatory frameworks with roundtables focusing on the relationship between the CSRD and global sustainability standards.
At this event, the GRI launched their new publication entitled 'CSRD Essentials' addressing key themes relating to the implementation of the CSRD. CSRD Essentials is described by the GRI as a practical and free resource addressed to policymakers and sustainability reporters that encapsulates 11 core briefings that explain the CSRD in accessible language.
The publication focuses on:
Following the launch, GRI Chief Policy Officer, Peter Paul Van De Wijs shared:
"CSRD Essentials serves as a one-stop-shop for navigating the challenges and opportunities of reporting under the new Directive. With a focus on clear explanations that help companies and reporters to understand the key aspects of the CSRD, this new resource reinforces GRI’s role to make sustainability reporting universal, accessible and beneficial for all stakeholders.”
Development of a Responsible Business Compass
On 22 May 2024, the Department of Enterprise, Trade and Employment (DETE) hosted the latest webinar in their responsible business series, ‘Responsible Business initiatives: Rising expectations’. There were three separate presentations on the Corporate Sustainability Due Diligence Directive (CSDDD), the proposed EU regulation on prohibiting products made with forced labour on the Union market and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct.
At the session, representatives from the DETE provided attendees with an update on the development of a highly anticipated ‘Responsible Business Compass’. It was noted that this is still on-going and will be hosted on the new National Enterprise Hub. EU funding has been granted for the development of the Compass which aims to help guide companies to the relevant information on Responsible Business initiatives and supports available. The project will span 14-18 months and will provide readily available and accessible information for policymakers in early 2025 and businesses by the end of 2025.
Separately, on 25 April 2024, the DETE launched a consultation seeking feedback on the Member State option to recognise, accredit, regulate and monitor independent assurance service providers (IASPs) with the deadline for submission of responses being 19 July 2024.
Corporate Sustainability Due Diligence Directive: European Council gives its final approval
Despite a number of twists and turns over the last few months, on 24 May 2024, the Corporate Sustainability Due Diligence Directive (CSDDD) was formally adopted by the Council of the EU. As the proposed directive has now been adopted by the co-legislators (the Parliament and the Council), it can now be signed into law by the presidents of the two institutions and then published in the Official Journal of the EU.
It will enter into force on the twentieth day following its publication and then the clock will start ticking for in scope companies in terms of its application. Member States will have two years (from the date of entry into force) to transpose the CSDDD into national law and the first tranche of large companies will have to comply with its provisions three years from the date of entry into force.
For more information on CSDDD, see our April update.
EFRAG publishes updated Compilation of Explanations
On 30 May 2024, EFRAG announced that 44 new Explanations have been added to the Compilation of Explanations document published on the ESRS Implementation Q&A Platform. These respond to technical questions on the ESRS submitted by stakeholders. Explanations were also released in February and March, bringing the total number published to date to 68 and all of these Explanations are set out in the Compilation of Explanations document.
These Explanations are provided as part of EFRAG’s role as a technical advisor to the European Commission and are expected to provide practical and timely support to preparers and others in the implementation of the ESRS.
EFRAG finalises ESRS Implementation Guidance
On 31 May 2024, EFRAG published its first three ESRS implementation guidance documents:
An explanatory note was also published to accompany IG 3.
These guidance documents are designed to support those required to prepare sustainability statements under the CSRD in accordance with the ESRS.
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.
Date published: 19 June 2024
