ERT Letter to Commissioner Mairead McGuinness on the need for interoperability between ESRS and ISSB standards

As the five-year of this European Commission comes to a close, ERT’s CFO Platform has written to Commissioner Mairead McGuinness a wide range of concerns about the interoperability between sustainability reporting frameworks. This is a key issue for companies led by Members of ERT as it is likely that they will be required to report under both ISSB Standards (IFRS SDS) and European Sustainability Reporting Standards (ESRS) whether at a parent company level, subsidiary level or both.

In addition, there are also reporting requirements in some jurisdictions at national level. It is crucial to provide a comprehensive and internationally comparable view of a company’s sustainability performance. Preparing different reports based on differing standards will lead to lack of comparability, confusion for users and misinterpretation of certain disclosure requirements. Double reporting will also cause unnecessary additional costs and reporting burden for preparers that will further diminish the competitiveness of European companies.

Unfortunately, as the interoperability guidance clearly shows, full interoperability between the ESRS and the ISSB standards has not been achieved regarding disclosures on climate-related matters. European companies will have to comply with additional requirements if they also apply the ISSB standards, an outcome which is highly likely to occur given that many subsidiaries will be in scope for individual reporting in jurisdictions that adopt ISSB. This results in a mosaic of requirements that unnecessarily increases the reporting burden and creates confusion for users.

The letter details ERT’s recommendations for addressing the ongoing contradictions, inconsistencies and inefficiencies, with a view to ultimately streamlining the administrative burden such reporting places on multinational companies.