Removing, merging and phasing DRs key to EFRAG’s plan to make its environmental standards less burdensome for companies.
EFRAG’s Sustainability Reporting Board (SRB) were presented with a series of amendments designed to scale down the European Sustainability Reporting environmental standards (ESRS E1 to E5) during this week’s meetings. These proposals are a response to criticism in the standards’ consultation that they could be overwhelming for companies.
As well as trimming the standards, the proposals also included a requirement in ESRS E1 (climate) for companies to disclose how their climate targets align with the global goal of limiting global warming to 1.5°C and would reduce the granularity of ESRS E2 (pollution).
Removing DRs
The EFRAG Sustainability Reporting Technical Expert Group (SR TEG), which presented these proposed changes to the SRB, has suggested merging disclosure requirements (DRs), removing DRs and phasing in qualitative reporting for financial effects.
The TEG proposals aimed to reduce the number of datapoints and DRs that companies would have to report on, as such it suggested that some disclosures could be removed entirely, such as ‘optional avoided emissions’ would be removed from ESRS E1 (climate).
Furthermore ‘response metrics’ and ‘Biodiversity-friendly consumption and production metrics’ would be deleted from ESRS E4 (biodiversity).
Merging DRs
The TEG also noted that some disclosures could be merged to streamline the overall number of information disclosed.
The proposal would reduce the number of DRs in E1 from 13 to 5 through removals and merging, with the DRs for Scope 1, 2, 3 and total greenhouse emissions into a single DR and the three DRs for financial effects (‘physical risks’, ‘transitional risks’ and ‘opportunities’) combined into one DR. The DRs on intensity of ‘energy’ and ‘GHG’ per revenue would also be merged into a single DR.
In ESRS E2 (pollution), the DR on pollution-related incident and deposit impacts was merged into DR E2-6 (potential financial effects from pollution-related impacts, risks and opportunities).
The DRs on ‘resource use optimisation’ in ESRS E5 (resources and circular economy) would be merged into ‘resource outflows’ (E5-4) whilst ‘circularity support’ would be merged into ‘action plans’ (E5-3).
In ESRS E-4, ‘pressure metrics’ would be merged with’ impact metrics into E4-5 (‘Impact driver metrics related to b&e change’). ‘Biodiversity offsets’ would either be merged into E4-5 or deleted altogether.
Phasing in of Financial effects
It was also the explicit aim of the proposed amendments that they phase in some DRs. The TEG has proposed that the DRs on financial effect in every environmental standard be phased in.
This would take the form of only requiring qualitative information on financial effects for the first three years and then require quantitative information after that period.
Next steps
The SRB will convene next week to decide whether to proceed with the proposed new draft for the environmental standards in the ESRS.