INSIGHT by IFRS, the International Financial Reporting Standards Foundation
Last week, the European Commission issued the European Sustainability Reporting Standards (ESRS) which come into effect in 2024.
To coincide with the publication, the European Commission, EFRAG and the International Sustainability Standards Board (ISSB) are providing an update on their discussions around alignment and interoperability between ESRS and the ISSB Standards.
The European Commission, EFRAG and the ISSB have worked jointly to improve the interoperability of their respective climate-related disclosure requirements in the overlapping climate disclosure standards. This work has successfully led to a very high degree of alignment, reduced complexity and duplication for entities wishing to apply both the ISSB Standards and ESRS.
ESRS and ISSB Standards have been developed within their respective mandates, with some differences on impact materiality beyond an investor’s perspective and coverage of the range of ESG matters in separate standards. However, the work undertaken on interoperability enables an entity to efficiently apply both sets of climate-related standards with minimised duplication of effort.
To assist entities who will apply both ESRS and the ISSB Standards, the European Commission together with EFRAG and the ISSB will work on interoperability guidance material that could assist entities in navigating between the standards and to understand where there are incremental disclosures required by only one set of standards.
The European Commission together with EFRAG and the ISSB will continue to work jointly to optimise the interoperability of their respective standards. In addition to the publication of guidance material to assist entities to navigate between the standards, the joint work will focus on the digital tagging of disclosures as a means of further facilitating interoperability.
“I congratulate my European colleagues on the publication of the European Sustainability Reporting Standards. Furthermore, I thank them for the positive collaboration to achieve the very high degree of alignment between climate requirements in the ISSB Standards and ESRS.
Much progress has been achieved. We have substantially advanced the reduction of the duplicative disclosure burden, reflecting our respective mandates. Those applying ISSB Standards as well as ESRS will be able to use our navigation tool.
We welcome the publication by EFRAG of a proposed table for their own work, which we have yet to review. We will complete our own analysis of the final ESRS and continue to work closely with the European Commission and EFRAG to develop suitable interoperability guidance material, providing clarity to the market as soon as practicable.
The ISSB was called upon to deliver consistent and comparable sustainability-related financial disclosures for investor decision-making. The recent strong progress towards interoperability with ESRS and IOSCO’s endorsement of the ISSB Standards demonstrates the continued international support for this vision and its implementation.”
-Emmanuel Faber, ISSB Chair
The IFRS Foundation was founded on the belief that better information supports better economic and investment decisions. As a public interest organisation, we work to achieve this vision through the development of high-quality, global standards that result in corporate information that informs investment decisions. This work contributes towards efficient and resilient capital markets.
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