Sustainability

• EC publishes draft Environmental Delegated Regulation 
• EFRAG enhances its sustainability reporting pillar 
• Corporate Europe Observatory challenges the influence of corporate lobby groups in EU policymaking 
• IAASB advances the timeline for sustainability assurance standard proposal 
• IOSCO supports IAASB plans for early engagement on sustainability assurance standard 
• ISSB prioritises climate-related disclosures 

EP reaches an agreement on CSDDD

The European Parliament’s (EP) Legal Affairs (JURI) Committee adopted its final position on the Corporate Sustainability Due Diligence Directive (CSDDD) on 25 April with 19 votes in favour, 3 votes against and 3 abstentions. Key points in JURI’s position: 

• scope captures more companies than the initial proposal of the European Commission (EC), lowering the threshold to 250 employees and a worldwide turnover of over €40 million 
• ‘value chain’ definition covers all upstream and downstream activities, including the marketing of products 
• directors shall put in place and oversee the due diligence actions  
• the inclusion of the financial sector is subject to further restrictions 
• risk prioritisation of adverse impacts is added as a new provision 

As a next step, the EP is expected to vote on its mandate on 1 June. The negotiations with the Council will follow. 

Accountancy Europe published a statement welcoming the adoption of JURI’s position and setting the tone for the trilogue negotiation. 

EC publishes draft Environmental Delegated Regulation

The EC issued a new set of EU Taxonomy criteria for economic activities that contributes to one or more of the following environmental objectives: 

• sustainable use and protection of water and marine resources 
• transition to a circular economy 
• pollution prevention and control 
• protection and restoration of biodiversity and ecosystems 

Stakeholders can comment on the draft Delegated Acts (DAs), the proposed amendments to the existing Climate DA and the Disclosures DA by 3 May 2023. 

EC launches call for evidence to establish 2040 targets

The EC is looking to set a 2040 target for EU Greenhouse Gas (GHG) reductions to ensure the path towards climate neutrality by 2050. For this purpose, the EC launched a call for evidence. Stakeholders can provide feedback by 23 June 2023. 

EFRAG enhances its sustainability reporting pillar

EFRAG established the EFRAG ESRS Digital Reporting Consultative Forum, which will discuss digital reporting aspects of sustainability reporting, including the ESRS XBRL taxonomy. 

In addition, EFRAG aligned its Due Process Procedures for Sustainability Reporting Standard Setting with the CSRD final text following its publication in the EU Official Journal. 

New GRI report explores the connection between due diligence and sustainability reporting 

The recent Global Reporting Initiative (GRI) analysis examines the current state-of-play on due diligence and explores the connection between due diligence and sustainability reporting. The paper calls for harmonisation of due diligence policies globally due to their cross-border implications. 

Corporate Europe Observatory challenges the influence of corporate lobby groups in EU policymaking

The European Ombudsman launched an inquiry into the EC’s Regulatory Scrutiny Board (the Board) following a Corporate Europe Observatory (CEO) complaint. CEO raised concerns that interactions between the Board members and interest representatives may have influenced its work on the draft CSDDD.

ESMA issues its enforcement and regulatory activities report

The European Securities and Markets Authority (ESMA) assessed how issuers comply with specific requirements, including non-financial reporting obligations. 403 issuers were examined to assess compliance with articles 19a and 29a of the Accounting Directive. 

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ESAs propose to amend and simplify sustainability disclosures

The European Supervisory Authorities (ESAs) opened a public consultation on changes to the Sustainable Finance Disclosure Regulation (SFDR) DA. This is to address issues that have emerged since the SFRD was introduced. 

Stakeholders can submit comments by 4 July 2023. 

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IAASB advances the timeline for sustainability assurance standard proposal

The International Auditing and Assurance Standards Board (IAASB) confirmed its intention to advance the consultation on a new sustainability assurance standard International Standard on Sustainability Assurance (ISSA) 5000. IAASB hopes to gain broad and early input on the draft ISSA 5000 and have the final standard ready in 2024.  

The ISSA 5000 Exposure Draft is subject to the IAASB’s approval this June. The consultation is expected to open end of July/early August 2023.

IOSCO supports IAASB plans for early engagement on sustainability assurance standard

The International Organization of Securities Commissions (IOSCO) welcomed the IAASB initiative to advance the consultation on sustainability assurance standard ISSA 5000. 

IOSCO issued a report outlining key considerations for an effective global assurance framework on sustainability reporting. In the report, IOSCO: 

• encourages timely and high-quality profession-agnostic standard-setting in the public interest 
• calls for early engagement with preparers, investors and providers 
• supports capacity building across the entire sustainability reporting ecosystem 

IOSCO issues its 2023 – 2024 Workplan

IOSCO confirmed it will work on sustainability reporting but also on sustainability assurance standards, including: 

• reviewing ISSB standards towards a potential endorsement  
• reviewing how different jurisdictions are using the new standards, and 
• helping in capacity building 
• setting out its vision and recommendations for assurance standards 
• engaging with the standards setters on the development of the assurance standards. 

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IASB launches project on climate-related risks in financial statements

The International Accounting Standards Board (IASB) initiated a project to explore whether and how companies can provide better information about climate-related risks in their financial statements. The outcome could be minor amendments to the existing IFRS accounting standards, new application guidance, new examples, or further educational materials. However, the project will not result in a new IFRS accounting standard. 

Andreas Barckow, IASB Chair, explained that the project illustrates connection between the work of the IASB and the International Sustainability Standards Board (ISSB).

ISSB prioritises climate-related disclosures

The ISSB added a transitional relief enabling companies to ensure they meet investor information needs. This will apply to climate change in the first reporting year using the ISSB Standards. 

In the second year of the ISSB standards application, companies will need to provide reporting beyond climate, including other sustainability topics. 

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TNFD Prototype Framework published

The Taskforce on Nature-related Financial Disclosures (TNFD) issued its prototype (Beta Release) framework. The framework prototype includes: 

• concepts and definitions 
• recommended disclosures 
• LEAP (Locate, Evaluate, Asses, Prepare) approach for assessment and management of nature-related risks and opportunities 
• TNFD methodologies, and 
• technical guidance. 

The prototype is open for public testing and feedback. TNFD framework will be published in September 2023 for market adoption. 

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ISSB open consultations on agenda priorities and SASB international applicability

The ISSB will ask for feedback on its agenda priorities, specifically on four identified potential projects:  

• biodiversity, ecosystems and ecosystem services 
• human capital 
• human rights, and  
• integration in reporting 

Stakeholders can expect a consultation in May with a comment period of 120 days. The ISSB will also open a 90-day consultation on its proposed methodology for revising the SASB Standards to improve their international applicability. 

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UKEB enhances its structure on sustainability

The UK Endorsement Board (UKEB) launched its National Standard Setters Sustainability Forum in April. Its members come from the UK, Australia, Malaysia, and Canada. The UKEB also established its Sustainability Working Group, which will advise the Secretariat on the connectivity of IFRS accounting and IFRS sustainability standards.