EU Requirements for Impact-Focused Sustainability Reporting Are One Step Closer
March 11, 2021 /3BL Media/ - Recommendations for the creation of European sustainability reporting standards would require large companies in the EU to disclose their external impacts in a way that meets the needs of multiple stakeholders while building on the standard setting of global bodies, such as GRI.
A report published on Monday by the European Financial Reporting Advisory Group (EFRAG) provides the European Commission with recommendations on establishing an EU sustainability reporting framework. A second report proposes reforms to EFRAG’s governance structure in order to take on a sustainability standard setting role.
The EFRAG recommendations, many of which closely align with the GRI Standards, includes that the new sustainability standards should:
- Build on and contribute to the global convergence of public and private sustainability reporting initiatives
- Position sustainability reporting on an equal footing with financial reporting, introducing connectivity between these two pillars to improve corporate reporting as a whole
- Adhere to ‘double materiality’, requiring both ‘impact materiality’ (external impacts of the company and its value chain) and ‘financial materiality’ (sustainability matters that financially affect the reporting entity)
- Meet the needs of an inclusive range of stakeholders, with standard setting that is conducted in the public interest and aligns with global goals, such as the SDGs and Paris Agreement
Eric Hespenheide, Chairman of GRI, said:
“The recommendations put forward for EU sustainability standards, if realized, would significantly advance sustainability reporting in Europe, by requiring the double materiality and multi-stakeholder focus that is necessary to ensure companies are accountable for their impacts.
We welcome the intent to work with existing sustainability reporting initiatives and the recognition that sustainability and financial reporting are of equal importance. GRI looks forward to working with the Commission and EFRAG, contributing our expertise and unique perspective from more than 20 years as the global pioneer of sustainability reporting.”
Judy Kuszewski, Chair of the Global Sustainability Standards Board (GSSB), the independent body responsible for setting the GRI Standards, added:
The GRI Standards are developed through a multi-stakeholder process, founded in the public interest and enable companies to provide a full and balanced picture of their sustainability impacts. As such there is close alignment between the proposed EU sustainability standards and those provided by GRI.
The GSSB is prepared to have dialogue with EFRAG on how we can support them in developing an EU sustainability standard setting framework that improves the consistency and comparability of disclosed information, while raising the bar for corporate transparency in Europe and beyond."
The European Commission has tasked EFRAG to conduct preparatory work for EU non-financial reporting standards. In January, GRI responded to EFRAG’s consultation on governance changes, setting out how GRI and the GSSB could provide support.
The Commission’s focus on sustainability standards setting is connected to the ongoing review of the EU Non-Financial Reporting Directive.
GRI is also engaging with the IFRS Foundation’s process, which is considering an expanded IFRS role to provide investor-focused sustainability reporting standards.
Global Reporting Initiative (GRI) is the independent, international organization that helps businesses and other organizations take responsibility for their impacts, by providing the global common language to report those impacts – the GRI Standards.