Accountancy Europe sends letter to Commissioner McGuinness on European sustainability reporting standards

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25 Apr 2022

Accountancy Europe has written a letter to the European Commission's Commissioner Mairead McGuinness on the development of purposeful and effective European sustainability reporting standards (ESRS) providing some important comments that need to be addressed in order for the ESRS to be a successful tool for the EU and its ambitious plan to to turn Europe into the first climate neutral continent by 2050.

Beginning with the strong statement that the ESRS disclosure requirements, as currently appearing in the European Financial Reporting Advisory Group’s (EFRAG) Project Task Force (PTF) Working Papers will not help meet the European Commission's Green Deal’s objectives, the letter then explains why:

  • Too complex or burdensome reporting systems risk generating unhelpful pushback and slowing down adoption. However, the ESRS requirements are very prescriptive and include hundreds of data points. 
  • Adhering to a robust due process is essential for creating support for future adoption even while the time pressure for the EU to follow its commitment is understandable. Allowing sufficient time to respond to the exposure drafts will, among other points, ensure stakeholder inclusiveness and public acceptance and therefore legitimise the standards.
  • Developing ESRSs needs to follow a principles-based approach as such an approach will support the connectivity between sustainability reporting and financial reporting, which follows an principles-based approach (including endorsed IFRSs).
  • To build standards that would result in transforming companies’ business models and meeting the Green Deal’s objectives, a phased-in approach is needed.
  • ESRS need to be clear and efficient reporting standards to enable assurance and to avoid risks of green washing.
  • ESRSs need to be globally aligned and build on what exists, which would also help EU companies that need to comply with other foreign climate-related disclosures that would allow the use of international ones. Different terminology, definitions and concepts and not using internationally recognised terms as well as different disclosure requirements objectives and structure will impair global compatibility.

The letter concludes by stating that:

[T]he proposed ESRS might need to follow an iterative process of improvement at an early stage to ensure they facilitate meeting the European Green Deal objectives, as well as align with the upcoming international sustainability reporting standards.

Please click to access the full letter on the Accountancy Europe website.

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