EFRAG annual report 2022 and future work

It makes for a very interesting read for those seeking to get (or stay) up to date on the developments in sustainability reporting in Europe (pages 30 to 45). In fact, things are happening so fast in this space that some forward-looking items at publication have already come to pass (e.g., the delegated act of the final first set of ESRS published on 31 July). Clearly, the work of EFRAG continues and shows no signs of slowing (we can sympathize). Three focus areas are identified, as prescribed by the CSRD:

• Capacity building for implementation by companies in scope
• Producing sector standards
• Producing mandatory standards for publicly listed small and medium enterprises (LSME) and voluntary standards for private small and medium enterprises (VSME)

Capacity building is a concept you can expect to hear a lot in coming months, as companies begin to grapple with the seismic change in corporate sustainability practices, including reporting. In the case of EFRAG, it’s currently working on a materiality assessment implementation guidance, value chain implementation guidance, and a list of the detailed requirements in the first set of standards, which will be provided in Excel to support gap analysis. Needless to say, we are eagerly looking forward to these tools!

In terms of sector-specific standards, EFRAG has prioritized 10 sectors based on their impacts on people and the environment: Mining, Quarrying and Coal mining, Oil and Gas, Road Transportation, Motor vehicles, Food and Beverages, Textiles, Accessories, Jewellery and Footwear, Power production and Energy utilities, and Agriculture, Farming and Fisheries. In time, it expects to produce a total of 42 sector standards.

Another key area of work, also prescribed by the CSRD, is the creation of an XBRL taxonomy that that enables digital tagging of companies’ sustainability statements and enables users of the reports to consume the machine-readable ESG data sets. Interestingly, EFRAG notes that this taxonomy should “support the operationalisation of interoperability” of the different reporting standards out there, in particular the IFRS Sustainability Disclosure Standards. Yes, it should.

EFRAG expects, between the end of 2023 and the beginning of 2024, to release for consultation (i) the first implementation support deliverables, (ii) the XBRL taxonomy for the sector agnostic standards already released, the two sets of standards for smaller companies, and the sector classification and first sector standard drafts.

No rest for the weary.