As EFRAG’s ESRS standards come into effect, many ESG standards organizations/reporting frameworks are announcing cooperation agreements in order to reach interoperability (on a side note, it appears that is the newest buzzword – unfortunately). GRI and CDP announced such agreements and now an unlikely organization joins their ranks. The ISSB and EFRAG are working together towards interoperability, after some back and forth over materiality standards. However, there is a caveat. It appears that the climate information reported under both the ESRS and ISSB will be standardized, but the two systems do not overlap entirely.
The press release from EFRAG states:
“EFRAG is delighted to also highlight that the recently adopted European Sustainability Reporting Standards (ESRS) incorporate the ISSB disclosures under a thorough interoperability approach. As entities prepare their sustainability statement in compliance with the comprehensive set of European standards which is the basis for mandatory sustainability reporting in the EU, they can therefore be assured that they also provide information in line with the ISSB requirements in relation to climate change without undue burden. EFRAG and the ISSB are currently working on an interoperability map that will illustrate this from a practical standpoint. This represents a significant milestone in progressing quality reporting on climate.”
Interoperability would provide relief to those subject to reporting under both the EU’s regime and another jurisdiction using the ISSB’s approach. Companies meeting the ESRS requirements would not have to duplicate their work to comply with an ISSB-based framework.
It is too soon to know if this means complying with the ESRS will exempt companies from ISSB reporting, or if there are areas of the ISSB that do not overlap with the ESRS. While this agreement may help those primarily reporting under the ESRS, it is less helpful to those reporting primarily under the ISSB – the ESRS is more expansive than ISSB standards which are focused on environmental issues. Even if ISSB reporting gets you part of the way through the ESRS, there is still a significant amount of information on social issues, impact and double materiality to be gathered and reported that is outside ISSB standards.
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