On December 22nd, the European Financial Reporting Advisory Group (EFRAG) released three crucial documents for companies navigating the new European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD).
This includes drafts for EFRAG IG, which deals with the requirements on the materiality assessment in ESRS and EFRAG IG 2 with the value chain aspects in ESRS. Draft EFRAG IG 3 contains the detailed ESRS data points as a Microsoft Excel workbook with an accompanying explanatory note.
The drafts contain thirteen and seven key points respectively that you can read directly here:
However, to make them more approachable, we’ve simplified these to into three sections below.
What information needs to be included in the sustainability statement?
- It should cover all major impacts, risks, and opportunities (IROs) your business has, both its own and those related to its suppliers, customers, and other partners (throughout the whole value chain).
- You only need to report on IROs that are significant for your business (not every single one).
- You should describe what you’re doing to address these IROs, including any policies, targets, and actions you have in place.
- Sometimes, the specific requirements of the ESRS won’t be enough to explain your IROs fully. In these cases, you can add extra information to your report.
- If you can’t get all the information you need, you can estimate it based on reasonable data and explain how you did this.
How do you decide what’s important enough to report?
- You need to conduct a materiality assessment to identify the IROs that matter most. This means considering how serious they are and how likely they are to happen.
- When doing this assessment, you should think about your entire value chain, not just your own operations.
- There’s no one-size-fits-all approach to materiality assessment, so you can use whichever method works best for your business.
- It’s good practice to talk to your stakeholders (people who are affected by your business) to get their input on what matters to them.
- The ESRS will give you some general guidelines for assessing materiality, but they don’t tell you exactly what to do.
What else is important to know?
- The ESRS don’t require you to use any specific format for your sustainability statement. You can design it however you think will be most helpful for your stakeholders.
- You should keep your report clear, concise, and easy to understand.
- Be honest and transparent about your IROs, both positive and negative.
- The Global Reporting Initiative Universal Standards is a good basis for the assessment of impacts under the ESRS.
Both drafts are open for public consultation until 2nd February 2024.
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