This is a major step forward in the implementation of non-financial information standards, which should be adopted by 50,000 European companies in two years. In 2020, Efrag (European Financial Reporting Advisory Group) was commissioned to develop this common language and has been advising the European Commission on the adoption of IFRS accounting standards for 21 years. This Friday, he approved his first set of standards, which he is submitting for public discussion by early August. These standards will then be proposed to the Commission, which will adopt them in the form of delegated acts.
A new level of stable reporting
Efrag recently revised its statutes and internal rules to finally incorporate a new level of stable reporting alongside its traditional financial reporting objectives. He created a new sustainability council, the Sustainable Development Reporting Board (SRB), based on the Technical Expert Group (TEG). The two organizations are taking on missions previously entrusted to a working group led by Patrick de Cambour, president of the Accounting Standards Board (ANC).
The SRB consists of 23 members, representatives of insurance companies, banks, companies, bodies of national accounting standards, as well as, for the first time, NGOs, scientists, trade unions and consumers. Its president will be appointed in June. The jury, which consists of representatives of the Commission, is currently interviewing five candidates. TEG consists of 22 experts from 11 different nationalities.
Fourteen standards of resilience
Efrag offers 13 sustainability standards for public consultation. Two set out general principles, the other 11 cover environmental issues (climate, pollution, marine resources, water, etc.), social issues, governance and business ethics. These standards will require the disclosure of about a hundred indicators that will allow them to assess and compare their environmental and social indicators.
These consultations take place during the last meeting on the draft European CSRD (Directive on Sustainable Development Reporting) in the framework of a trilogue (Parliament, Commission, Council). A compromise is expected to be reached by June 30, when France holds the presidency of the European Union.
Even before publication, these new non-financial standards are already being criticized. And it is no coincidence that the ISSB (International Council on Sustainability Standards), established in November, wants to provide sustainability standards to organizations around the world. Under the chairmanship of Emmanuel Faber, former head of Danone, he is a partner of the IASB (International Accounting Standards Board), responsible for developing IFRS accounting standards for consolidated reporting. To give it international legitimacy, three independent bodies that already existed and developed their own reporting rules merged: the CDSB (Climate Disclosure Standards Board), the SASB (Sustainable Accounting Standards Board) and the Integrated Reporting Framework.
Will Efrag and ISSB be able to cooperate? Patrick de Camburg has repeatedly spoken about joint construction. To do this, we must agree on what needs to be built. However, there is a serious point of divergence between the two organizations, almost philosophical. Europeans base their non-financial reporting on dual materiality, which analyzes both the impact of ESG (environmental, social and managerial) risks on the company and the company’s impact on society. ISSB wants to cover only one of two aspects, environmental and social impact on companies, to inform investors about their risks.