As part of its work to support robust climate and sustainability reporting frameworks, IIGCC has reviewed the revised European Sustainable Reporting Standards (ESRS) submitted to the European Commission. Below is an overview of key developments, their significance for investors, and where further progress could support the effective delivery of the EU Green Deal.
The submission of revised and simplified European Sustainability Reporting Standards (ESRS) to the European Commission marks an important step in aligning corporate reporting with the objectives of the European Green Deal. As the European Financial Reporting Advisory Group (EFRAG) notes, the goal of the simplification exercise is to enhance competitiveness without compromising these objectives. Against this backdrop, IIGCC has assessed the implications for investors and the integrity of corporate sustainability disclosures.
EFRAG’s revisions appear to strike a more effective balance between simplification, flexibility, and decision-useful data, which could improve investor access to the material information necessary for risk management and investment decisions. The changes have led to a 61% reduction in mandatory datapoints and the deletion of voluntary datapoints. Where this has been achieved through removing duplication, improving cross-referencing and using investor-informed materiality assessments, it represents pragmatic streamlining.
The retention of core climate-related disclosure requirements under the revised ESRS-E1 Standard ensures continuity in how investors evaluate the ambition and credibility of corporate transition efforts. The five key components of a credible climate transition plan identified in the Standards provide a helpful reference point for monitoring progress and broadly align with investors’ expectations. The inclusion of biodiversity and ecosystem transition plans under ESRS-E4 provides important recognition of nature-related transition planning and broadens the emphasis on nature alongside climate mitigation and adaptation.
In a world where focus shifts to reporting the most decision-useful information for users of disclosures, some gaps remain. Preparers are required to disclose measurable, time-bound, outcome-oriented emissions reduction targets under ESRS-E1, with these requirements strengthened through tighter alignment with the GHG Protocol. Investor needs would be better served if these targets are clearly broken down into short-, medium- and long-term commitments, supporting alignment with the Paris Agreement’s ratchet mechanisms and interim milestones under the EU Climate Law, such as the 2040 target.
General disclosure requirements on political engagement and lobbying activities are an important starting point, but there remains a need for more specific climate-related lobbying disclosures under the ESRS-E1 climate standard. Including a targeted subset of lobbying-related disclosures in the topical standards – in line with the investor-led Global Standard on Responsible Climate Lobbying – would provide greater insight into how companies are engaging, directly and through industry associations, in Paris-aligned policy advocacy and how any misalignment is being addressed.
EFRAG’s decision to preserve requirements for qualitative and quantitative disclosures on anticipated financial effects, while increasing alignment with the ISSB Standards, supports a more consistent approach to assessing financial materiality across jurisdictions. However, extended phase-in periods remain a concern, as delaying quantitative disclosures until 2030 risks undermining investors’ ability to anticipate and mitigate climate-related risks that could crystallise earlier.
Reliefs allowing undertakings not to disclose current and anticipated financial effects due to limited skills, capabilities or resources could weaken consistency and comparability if not accompanied by adequate safeguards. ‘Undue cost or effort’ exemptions may similarly constrain data availability over time. Clearer requirements for disclosure of plans to close identified gaps are needed to help improve data availability and quality.
EFRAG’s renewed commitment to interoperability with the ISSB Standards is a constructive step. Publication of updated mapping documents would further support comparability, and limiting reliefs that go beyond those in the ISSB Standards would help maintain global alignment and investor confidence.
With sector-specific ESRS standards no longer being taken forward, alignment with established frameworks such as the SASB Standards and GRI remains essential. References indicating that both can serve as potential disclosure sources under ESRS provide useful flexibility while supporting continuity across reporting systems. In the absence of dedicated sector standards, it will be important for the Commission to consider, at a minimum, non-binding implementation guidance to help fill this gap.
To preserve the integrity and global consistency of investor-relevant disclosures, it will be important that the Commission broadly upholds EFRAG’s proposed ESRS revisions, while tightening safeguards around reporting reliefs and limiting divergence from international standards. IIGCC will continue to advocate for comprehensive, credible and usable EU sustainability standards that meet investors’ information needs.
The evolution of the ESRS remains central to improving the quality and comparability of sustainability disclosures. IIGCC will continue engaging with policymakers and market participants to help ensure the standards support investors and the delivery of the EU’s climate and sustainability goals.
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