Dr. Hanne Böckem
Partner, Audit, DPP
KPMG AG Wirtschaftsprüfungsgesellschaft
The Corporate Sustainability Reporting Directive (CSRD for short), adopted in December 2022, obliges certain companies or groups to include a sustainability report in the (consolidated) management report and to make comprehensible in this report, on the one hand, the effects of the company with regard to people and the environment (impact perspective) and, on the other hand, the effects of sustainability aspects on the development, earnings position and financial position of a company (financial perspective).
The newly introduced Article 29b in the EU Accounting Directive empowers the European Commission (EU Commission) to issue delegated regulations setting out detailed reporting requirements in the sustainability report (European Sustainability Reporting Standards, ESRS). The EU Commission had commissioned the European Financial Reporting Advisory Group (EFRAG) to develop drafts for the ESRS and submit them to the EU Commission. After an extensive process, EFRAG had submitted the first set (Set 1) of draft ESRS to the EU Commission in November 2022. In order for the ESRS to have legal effect, the EU Commission has now submitted a draft Delegated Regulation on the adoption of the first set of standards in accordance with Article 29b and granted interested stakeholders a comment period of four weeks.
The EU Commission's proposal provides for some significant changes compared to the standards drafted by EFRAG, which are intended in particular to reduce the burden on reporting entities:
- All standards and disclosures are dependent on materiality for the reporting entity, i.e. there are no general mandatory disclosures beyond the general disclosures of ESRS 2,
- Extension of the phase-in concept,
- Increase in the proportion of voluntary disclosures,
- Greater flexibility in determining disclosures, e.g. in the form of additional leeway in disclosures on the financial impact of sustainability risks,
- Increasing consistency with other EU regulations, and
- Increasing consistency with other reporting standards such as the ISSB and GRI standards.
The comment period ends on 7 July 2023. The draft Delegated Regulation and its Annexes I and II as well as the feedback submission form can be downloaded here.