Joint recommendations from users of sustainability data on the European Commission’s revised ESRS and voluntary standard delegated acts

i) Problematic changes to specific data points.

Some changes proposed in the draft delegated act to individual data points remain concerning for users of sustainability data because they risk reducing comparability and alignment with international standards.

• Climate transition plans. Climate scenario analysis is a core component of climate risk assessment and transition planning from an investor perspective. Making it voluntary would weaken disclosures and create divergence from established international frameworks where it is mandatory such as IFRS 2 standards. Climate scenario analysis should therefore be reinstated as a mandatory element of transition plan disclosures in the ESRS.
• GHG reporting boundaries. Allowing companies to choose between financial control, operational control and equity share approaches for greenhouse gas reporting would improve interoperability with ISSB and the GHG Protocol. However, the signatories of this statement stress the importance of ensuring transparency of the methodologies employed and to strive for as much comparability as possible in reported information.
• Biodiversity and microplastics. Additional aggregation options for biodiversity disclosures risk weakening the granularity of site-level information that investors need to assess physical risk exposure, and the lack of an explicit value-chain dimension may leave material impacts insufficiently covered. Similarly, removing the qualitative data point on secondary microplastics would reduce the availability of material pollution-related information for investors. These disclosures should be preserved in the final delegated act.
• Own workforce and human rights disclosures. Replacing established due diligence concepts such as direct linkage with less clearly defined wording creates divergence from international frameworks such as the UN Guiding Principles and the OECD Guidelines, and narrowing the scope of reportable human rights incidents to ongoing proceedings or substantiated instances would reduce transparency. These data points should be restored in line with EFRAG’s initial simplification recommendations

ii) Over-extensive phase-ins and reliefs without safeguards.

Targeted reliefs can be useful for preparers, but their credibility depends on appropriate safeguards. As currently drafted, extensive cross-cutting reliefs, including those based on undue cost or effort, lack sufficient conditions, justifications and time limits. The same concern applies to reliefs linked to anticipated financial effects, where companies may be allowed to omit disclosures on the basis of insufficient skills, capabilities or resources, or because the information is considered commercially sensitive. Without safeguards, these reliefs risk becoming common practice rather than exceptional measures, undermining the transparency, comparability and reliability of sustainability disclosures.

In addition, the draft delegated act suggests additional phase-in provisions for wave 2 companies allowing them to omit any information on AFEs for their first year of reporting, and to omit information on quantitative anticipated financial effects for their first three years of reporting. Compounded with the rest of the reliefs, these phase-ins may lead to delaying access to essential information for users of sustainability data.

Given the significantly narrowed scope of the CSRD following the Omnibus initiative, companies remaining in scope should be expected to dedicate sufficient resources to meet these requirements in a timely manner. The European Commission should therefore require clear eligibility conditions, mandatory justification, and time-bound phase-out plans whenever a relief is used and ask EFRAG to provide guidance clarifying when reliefs are justified and how preparers should progressively close data gaps.

iii) A value chain cap restricting information availability.

The draft delegated act retains only a subset of the voluntary standard data points under the value chain cap. This further limits the information that preparers can collect across their value chains, likely reducing the availability, comparability and decision-usefulness of information for users. This would be detrimental in particular for investors’ capital allocation decisions and reporting obligations under the Sustainable Finance Disclosure Regulation (SFDR). An excessively narrow value chain cap may also encourage the continued use of proprietary ESG questionnaires and bilateral information requests. This would increase reporting burden on SMEs rather than reduce them, contrary to the objectives of proportionality and simplification.

To address these issues, we recommend fully aligning the scope of the value chain cap with the basic and comprehensive modules of the voluntary standard.

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DISCLAIMER: This statement was prepared jointly by the signatory organisations and does not necessarily represent the views of their respective memberships, either individually or collectively. Each signatory organisation and its members remain fully independent in their decision-making. This statement has been developed in compliance with applicable competition and antitrust laws.