Implementation Guidance for European Sustainability Reporting Standards
The European Financial Reporting Advisory Group (EFRAG) releases Implementation Guidance for European Sustainability Reporting Standards (ESRS), aimed at providing guidance for enterprise to implement sustainable information disclosure based on ESRS.
As an important player in the development of European Sustainability Reporting Standards, the European Financial Reporting Advisory Group provides technical advice for EU regulations. In addition to the European Sustainability Reporting Standards for large companies, the European Financial Reporting Advisory Group also releases a draft of the Sustainability Reporting Standards for Small and Medium-sized Enterprises, establishing sustainable disclosure standards for small and medium-sized enterprises.
Related Post: EFRAG Releases Draft on Sustainability Reporting Standards for SMEs
Introduction to Implementation Guidance for Sustainability Reporting Standards
Last March, the EU requested that the European Financial Reporting Advisory Group prioritize providing guidance to enterprises on how to write sustainability reports. The European Financial Reporting Advisory Group cancelled the priority of developing industry specific standards and developed Implementation Guidance for European Sustainability Reporting Standards. Last December, the European Financial Reporting Advisory Group releases a draft document of these Guidance and solicited market opinions before February. After considering the opinions from the market, the official version of the implementation Guidance was launched in May.
The Implementation Guidance for European Sustainability Reporting Standards are divided into three parts, namely Material Assessment Implementation Guidance, Value Chain Implementation Guidance, and List of ESRS Datapoints.
Material Assessment Implementation Guidance provides a method for enterprises to conduct materiality assessments, and introduce the concepts of impact materiality and financial materiality through some cases. Enterprises can disclose substantial sustainable impacts, risks, and opportunities based on the guidance. These disclosures should not only include the company’s own business activities, but also involve its partners in the value chain. Companies can refer to the Value Chain Implementation Guidance to disclose complete information.
The Value Chain Implementation Guidance provides reporting requirements based on the value chain, including guidance on information disclosure for upstream and downstream stakeholders of enterprises. The Value Chain Implementation Guidance need to be used in conjunction with the Material Assessment Implementation Guidance for companies to disclose material value chain information. When enterprises are unable to obtain relevant information due to various reasons, they can refer to the guidance to handle missing information.
The List of ESRS Datapoints provides data points and related information for each disclosure project, including 161 mandatory disclosure data points and 622 data points determined based on materiality assessment. Each data point provides detailed information collection and disclosure requirements to establish consistent and comparable datasets. Except for the general disclosure guidance of ESRS 1, all disclosures under European Sustainability Reporting Standards can be found in the List of ESRS Datapoints.
The implementation Guidance also explain the relationship between the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), that is, the disclosure obligation of the CSRD is independent of the information disclosure obligation of the CSRD. Therefore, the European Sustainability Reporting Standards do not cover the disclosure of information related to Corporate Sustainability Due Diligence Directive. However, European Financial Reporting Advisory Group encourages companies to comply with the Corporate Sustainability Due Diligence Directive in order to improve transparency in sustainable development information disclosure.
The European Financial Reporting Advisory Group believes that companies can effectively comply with European Sustainability Reporting Standards and improve the transparency and consistency of sustainable development information disclosure in accordance with the requirements of the three Implementation Guidance. The European Financial Reporting Advisory Group provides feedback on each implementation guideline on its official website for participants to access.
Reference:
Finalization of Three EFRAG ESRS Implementation Guidance Documents
