Expert Paper – European Sustainability Reporting Standards (ESRS)

ERT recognises the need for introducing ESRS to direct capital flows towards a more sustainable economy. We welcome the improvements that have been made by EFRAG following the consultation process, including the deletion of the rebuttable presumption principle, the reduction in the number of disclosure requirements and data points on which undertakings are required to report, and further alignment with the reporting structure of the Task Force on Climate-related Financial Disclosures (TCFD), the current status of the standards developed by the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) standards. The transitional provisions (phase-in) for specific disclosure requirements – e.g. in the context of the value chain for the first three years of application – are also appreciated.

Despite the improvements, the twelve draft ESRS still contain 82 disclosure requirements and more than 1,000 datapoints – many of which are mandatory. From our perspective, the disclosure requirements are still too extensive, granular and complex and therefore present a significant burden on European companies to implement in such a short time frame.

ERT would strongly encourage to provide for sufficient and substantial guidance and teaching material on the final ESRS to ease the implementation and application for preparers. Without such guidance and materials, there may be different interpretations which defeat the purpose of the CSRD and ESRS.

We also suggest setting up an interpretations committee – similar to the IFRS Interpretations Committee – to provide undertakings with the best available technical expertise, harmonise the interpretation of the legal texts and ensure the comparability of disclosures.

The priority should be on making the sector-agnostic standards implementable for the preparers and not to rush through sector-specific standards that will add further disclosure requirements and increase the pressure on preparers. Undertakings should have sufficient time to implement the first set of ESRS.