Global Finance Groups Push for Simpler European Union Sustainability Reporting Rules

The undersigned associations represent financial institutions headquartered outside of the EU, but with significant operations in, and commitment to the European Union. Accordingly, our members fall within the scope of the EU's sustainability reporting regime under the Corporate Sustainability Reporting Directive (CSRD), either by way of their EU subsidiaries or as a result of the CSRD's extra-territorial application.

We strongly support the Commission's stated objective of simplifying the European Sustainability Reporting Standards (ESRS) and reducing the compliance burden for preparers. The revision should maintain this simplification objective, focus on decision-useful information for banks, investors and other users and provide a workable approach to sustainability reporting for all companies operating in the EU. We would also like to take this opportunity to urge EFRAG and the Commission to ensure that the simplification objective is also clearly embedded within the forthcoming standards for non-EU groups (NESRS).

Against this backdrop, we remain of the view that interoperability with internationally recognised sustainability reporting standards, in particular those of the International Sustainability Standards Board (ISSB), constitutes an important way to reduce reporting complexity and duplication for firms operating globally with multi-jurisdictional value chains. We therefore strongly support the aim of taking account of and enhancing the ESRS' interoperability with global sustainability reporting standards, such as those of the ISSB and the Global Reporting Initiative (GRI).

This consultation response sets out our recommendations for targeted modifications to the revised ESRS that would ease the reporting burden for internationally operating companies by further aligning sustainability reporting frameworks and preventing duplicative reporting efforts. In addition to this, we have set out additional technical recommendations in the Annex of this document that should improve the effectiveness of the ESRS framework.

I. Provide flexibility in the EU reporting structure to enable the leveraging of parent-level reports

The draft Delegated Act on the revised ESRS proposes retaining the prescribed structure of the sustainability statement under ESRS 1 paragraph 105. In practice, a highly prescriptive presentation structure may limit the ability of multinational groups to leverage existing group sustainability reporting processes and disclosures prepared in line with the requirements of their home jurisdictions or internationally recognised sustainability reporting standards, while incorporating the disclosures necessary to meet the EU's sustainability reporting requirements. The absence of flexibility in the reporting structure would result in an unnecessary duplication of reporting efforts and redundant administrative burden without any additional benefits in terms of the scope or quality of disclosed information. We further believe that providing flexibility in the reporting structure does not in any way affect the comparability or understanding of sustainability reporting, given the required compliance with ESRS disclosure requirements and data points and the increasing availability of digital tools that render a strict structure obsolete. Instead, a degree of flexibility would foster market-driven convergence in reporting practices, which would increase the global comparability of sustainability disclosures. For these reasons, we urge the Commission to remove the strict structural requirements under ESRS 1 paragraph 105.

To read the full comment letter, please click here, or click on the download button below.