The EU is currently in the process of simplifying the European Sustainability Reporting Standards (ESRS) used with the Corporate Sustainability Reporting Directive (CSRD). While some have welcomed the dramatic reduction in required datapoints under the current draft ESRS, others are skeptical. The European Central Bank recently published a Staff Opinion on the ESRS, where it raises multiple concerns:
“First, the introduction of numerous permanent relief measures, phase-ins and exemptions from disclosure requirements, together with the removal of some critical datapoints, will limit the availability of meaningful data and hamper the comparability of disclosures across companies… Second, while improvements have been made to increase interoperability with international standards like those published by the International Financial Reporting Standards/International Sustainability Standards Board (IFRS/ISSB), ECB staff have identified some critical deviations, in particular related to the inclusion of reliefs beyond those in IFRS/ISSB. Third, ECB staff have identified some key points where clarification is needed to ensure that the revised draft ESRS are appropriate for meaningful disclosures by the financial sector.”
Investors have also taken issue with the availability of data under the simplified ESRS. Additionally, others have flagged the potential interoperability issues with IFRS/ISSB. We’ll see how EFRAG incorporates the ECB’s feedback and if the ESRS change substantially as a result.
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