EU policy-makers agreed last night to postpone by two years the deadline for the adoption of sector-specific standards for companies sustainability reporting, which was initially set in the EU Corporate Sustainability Reporting Directive for June 2024.
EFRAG - the technical advisory body preparing the EU draft standards - started working on sector-specific standards in 2022 but paused in Spring 2023 by direct request of the EU Commission to prioritise other work on the implementation of the first set of sector-agnostic EU standards.
Although we regretted this decision, we welcome that Members of the European Parliament and Council negotiators further precised the mandate for the EU Commission to adopt eight of the sustainability standards “as soon as each is ready”, or at the latest by 2026.
As outlined by NGOs, business and financial leaders as well as academics, the development and adoption of sector-specific standards is instrumental to make the reporting exercise easier for companies, while ensuring meaningful and comparable information for investors.
This year, companies will start to apply the first set of sector-agnostic standards, which cover general disclosures on strategy, governance and business model as well as reporting of environmental, social and human rights topics. However, there are important and complex issues such as decarbonisation, biodiversity or human rights issues in the value chain that were left to be clarified in the sector-specific standards, as concrete impacts and methods differ from sector to sector.
Instead of relieving companies, unduly delaying sectoral standards will only reduce clarity for companies to deliver on their reporting. This is particularly true for companies that have never performed a materiality assessment or that will start reporting sustainability information for the first time. EFRAG and the European Commission must heed the legal mandate and work to swiftly finalise and adopt the sector-specific standards that already count with advanced drafts covering 8 priority industries with high sustainability impacts.
The agreement among EU co-legislators needs to be formally voted by the Council and EU Parliament, but is expected to be in place before the EU elections this year.
Partners of the Alliance for Corporate Transparency remain committed to the development of EU Sustainability Reporting Standards, including via direct contribution and engagement in EFRAG technical work.
“Following the plan charted by the EU Corporate Sustainability Reporting Directive, we’re glad to see EU policy-makers stressing the need to provide clarity for companies operating in industries with high impacts on our environment and society. EFRAG must reprioritise the work on sector-specific standards to ensure it delivers on time” - Susanna Arus, EU Public Affairs Manager, Frank Bold
“The Parliament and Council’s decision to adopt eight sector standards ‘as soon as ready’ by 2026 is bittersweet. While it acknowledges the urgency, the 2-year delay inevitably increases the reporting burden for companies, given the sector standards’ pivotal role in implementing the first set of ESRS. We must ensure EFRAG prioritises and promptly publishes these standards to maximise their impact.” - Mariana Lopez, Senior Programme Manager, ECOS
“The outsized contributions of certain sectors to global challenges including corruption, climate change, and the transition to a green economy mean that investors and citizens should not be made to wait for actionable sustainability data. EFRAG and the European Commission must embrace the mandate they have been given to adopt standards for high risk sectors–including oil and gas, and mining–as soon as each is ready.” - Robert Pitman, Senior Governance Officer, Natural Resource Governance Institute
For further information, please contact: susanna.arus@frankbold.org
European companies can now take a look at the draft sustainability reporting standards they will report against in the coming years. The drafts were developed by the EFRAG Project Task Force on EU Sustainability Reporting Standards, with the participation of two Frank Bold representatives - Head of the Responsible Companies Section Filip Gregor, and Joanne Houston, from Frank Bold's Brussels office. Both experts will continue contributing to the development of the EU standards as members of the newly established EFRAG Sustainability Pillar.
As part of its strategy to implement the European Green Deal and the Action Plan on Financing Sustainable Growth, the European Commission presented its proposal for a Corporate Sustainability Due Diligence Directive (CSDDD).
The Corporate Sustainability Reporting Directive (CSRD) proposal stipulates that EFRAG should be responsible for carrying out a due process to draft, consult and deliver EU sustainability standards for adoption by the European Commission. On 1 March, the EFRAG General Assembly appointed the members of the EFRAG Sustainability Reporting Board, which will be responsible for all sustainability reporting positions of EFRAG, including technical advice to the European Commission on draft EU Sustainability Reporting Standards and related amendments.
