The Commissioner’s speech at COP26 focused on progress made by the EU on sustainability reporting with a special focus on the Corporate Sustainability Reporting Directive (CSRD) and EFRAG’s preliminary work to develop standards that use a double-materiality perspective.
Commissioner McGuinness welcomed the IFRS’s Foundation initiative to develop a common global baseline on sustainability reporting. She also emphasised that global standards should be a common floor and not a ceiling that limits those who want to go further and faster. To this end, a two-way cooperation between global and regional standard setters is critical.
Accountancy Europe welcomed these remarks and echoed the need for the EU to build on what already exist as well as the importance of a two-way cooperation.
MEP Pascal Durand (Renew Europe/France), who is leading on the file, presented his draft report on the CSRD proposal to the European Parliament (EP) Legal Affairs Committee on 1 December. The rapporteur is proposing to amend certain aspects of the European Commission’s (EC) proposal, to note a few:
Amendments will be considered mid-January 2022. The Legal Affairs Committee is expected to reach a position in March 2022 and enter trilogues in April 2022.
The Slovenian Presidency presented the report at Competitiveness Council in November. In the report, the following matters were considered as the main political issues:
The Presidency presented the compromise text for initial exchange of views at the Council Company Law WP meeting on 8 December. The Council is expected to reach a general approach by the end of February/March 2022.
Following comments received to the Consultation on the Due Process Procedures for EU sustainability reporting standard-setting, EFRAG issued a feedback summary.
The main observations of the reports are:
EFRAG’s Project Task Force on EU sustainability reporting standards issued their status report on the progress towards developing EU sustainability reporting standards (ESRS). Earlier in November, EFRAG announced the establishment of 11 Expert Working Groups (EWGs) on sustainability matters that will provide input for the development of draft ESRS. The EWGs will start their work as soon as the respective materials are available. EFRAG is also looking for new members to join its sustainability reporting pillar in view of its new role as the future EU sustainability reporting standard setter. The deadline for application for EFRAG membership was 8 December 2021.
According to our information, the EC regulatory scrutiny board has once again rejected the EC sustainable corporate governance proposal. The directive was planned for adoption on 8 December. The new date has now been set for 30 March 2022. The legislative proposals are expected to include environmental and social supply chain due diligence and directors’ duties to integrate mandatory sustainability criteria into their decision-making.
MEP Paul Tang (S&D/Netherlands), who is leading on the EU green bond standard file, published a draft report on the proposal. The rapporteur notes four key principles: 1) introduce a transition plan for every issuer; 2) ensure equal requirements for European green bonds and other sustainable bonds; 3) ensure independence of external verifiers; 4) create a deep and liquid market.
The Economic and Monetary Affairs committee is expected to reach a position by early April 2022.
In June, the EC issued the EU Taxonomy Climate Delegated (DA) that was subject to co-legislators’ scrutiny over the period of four months. The Council extended its scrutiny period for two additional months until 8 December but has now cleared the Climate DA. The DA specifies the criteria for economic activities to qualify as contributing substantially to climate change mitigation and adaption, and whether they cause significant harm to other environmental objectives. The DA rules will apply as from 1 January 2022.
In her speech at the DSW (association representing private investors) conference, the Chair noted that the European Securities and Markets Authority (ESMA) is preparing an ambitious and comprehensive programme on sustainable finance in which greenwashing will be tackled too. ESMA is actively monitoring developments on sustainability reporting standard setting. The Chair noted that it is important to ensure that the European and the global standards are inter-operable to ensure helpful disclosures to investors.
In its communication, ESMA highlighted its work on sustainable finance and commitment to deliver on the UN COP 26 objectives to fight climate change by setting out concrete actions, among which:
IFAC issued a statement addressing the importance of global standards and regulation. The statement supports “decision-useful disclosure and the value of interconnected approach to sustainability and financial information reporting and assurance”.
The International Platform on Sustainable Finance (IPSF) and the EC organised an annual IPSF event as part of COP26. IPSF presented three reports:
The UK Financial Reporting Council (FRC) published a staff factsheet which emphasizes the need for preparers to consider the impact of climate-related matters on the financial statements and narrative reporting.
Read moreThis curated content was brought to you by Vita Ramanauskaité, Accountancy Europe senior policy advisor since 2015. You can send her tips by email, follow her on Twitter and connect with her on LinkedIn.
