The European Financial Reporting Advisory Group (EFRAG) has released its initial draft of European Sustainability Reporting Standards, setting out the proposed rules and requirements for companies to report on sustainability-related impacts, opportunities and risks under the EU’s upcoming Corporate Sustainable Reporting Directive (CSRD).
The proposals are part of a series of exposure drafts (EDs) which are divided into environment, social and governance categories. The first group includes climate change, pollution, water and marine resources, biodiversity and ecosystems, and resource use and circular economy.
The social banner comprises its internal workforce and those in the value chain as well as affected communities, consumers and end users. Last but not least is governance, risk management and internal control and business conduct.
The new drafts cover standardised “sector-agnostic” disclosures that would apply across all sectors as well as sustainability-related material impacts, risks and opportunities at the entity-specific level.
Companies covered by the rules would be required to provide sustainability reporting on their strategies and business models, governance and organisation, Also on t he list is materiality assessments of sustainability impacts, opportunities and risks, as well as policies, targets, action plans and performance.
The CSRD, which is set to come into force in January 2024, is a major update to the current Non-Financial Reporting Directive (NFRD), the current EU sustainability reporting framework.
The new rules will significantly expand the number of companies required to provide sustainability disclosures to over 50,000 from the roughly 12,000 currently.
It will also introduce more detailed reporting requirements, and require audited assurance of the information reported.
EFRAG is a private association majority financed by the EU that was mandated by the European Commission in June 2020 to prepare for new EU sustainability reporting standards, as part of the revision of the NFRD
Last May, it was requested to develop reporting standards for the CSRD, resulting in its activities being reorganised into two pillars – financial and sustainability reporting.
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