5 take-aways from ESMA’s “CSRD Implementation” statement

Here’s a note from Heike Schmitz:

For all companies caught by the first wave of EU sustainability reporting under CSRD, the European securities regulator ESMA has recently voiced its “expectations” in a Public Statement issued on July 5th. Nothing entirely surprising, but a few items that are likely to add to the complexity of CSRD implementation:

– Companies should consider all guidance issued by the EU Commission and EFRAG and submit open questions on time to EFRAG and national regulators – no easy task considering that the EFRAG guidance by now amounts to several hundreds of pages…
– A comprehensive and detailed materiality analysis under the ESRS rules is core of every sustainability statement. ESMA points out that even if many topics are not considered material, this does not exempt the company from performing and disclosing a full materiality analysis.
– If a topic is material, all required data points should be disclosed. If a company has nothing to report, this must be clearly disclosed (and not just omitted). Although the ESRS only require this for climate change, ESMA notes that companies should clearly state if information required under other EU regimes (e.g. SFDR) is not considered material.
– ESMA points out that lack of data is no excuse for incomplete disclosures, noting that the transitional rules for the value chain should be sufficient to help companies deal with data challenges. Definitely a view that is not being shared by companies struggling to obtain required data even from own operations…
– Finally, ESMA emphasizes the need for coherence between the sustainability statement and the financial statement – for example, negative financial impacts from sustainability topics or expenditures for sustainability-related actions must be accurately reflected in the financial statement.

At the same time, ESMA has released a 100 pages Final Report containing Guidelines on Enforcement of Sustainability Information for national regulators – adding to the long reading list for companies but definitely worth having a look to understand how national regulators will review the first CSRD reports issued next year.