The Omnibus revisions to the EU’s Corporate Sustainability Reporting Directive (CSRD) might be complete, but that doesn’t mean changes to CSRD reporting are over. The European Financial Reporting Advisory Group (EFRAG) is working on a new set of simplified European Sustainability Reporting Standards (ESRS). Those draft simplified ESRS are currently pending, and new research from EFRAG shows that companies are generally happy with where the drafts are at. A Cost-Benefit Analysis published by EFRAG last month states:
“Overall, there is a widespread sentiment among Wave 1 preparers that the amendment of the ESRS will lead to reduced reporting costs. Nearly 90% of companies expect a reduction in recurring internal costs, while almost 75% anticipate a reduction in recurring external costs. For both internal and external recurring costs, the median expected reduction is 20%. A similar overall expected reduction is also observed for Other Waves preparers.”
However, while companies look forward to cost savings, investors are worried that the new standards hurt the quality of data in CSRD reports. The study notes that:
“The surveyed and interviewed companies generally agree that the streamlining introduced by the Amended ESRS does not come at the expense of data quality. Users, however, appear less optimistic about whether the simplification of the ESRS will preserve the quality of information. In fact… 55% of users believe that the ESRS amendments will negatively affect information quality (67% when considering investors and financial institutions only), 24% consider the impact to be unclear, and only 21% believe that the quality will be maintained.”
It is a difficult balance between easing burdens for companies and meeting investor expectations. Though there is evidence that the companies’ cost savings will win out over investor demands. The study concludes that, in the researchers’ opinion, the benefits of the new simplified ESRS outweigh the potential costs.
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