ACCA is calling for a global approach to the development of sustainability disclosure standards.
Responding to exposure drafts (EDs) on European sustainability reporting standards (ESRS), ACCA says it has consistently advocated for a global approach to the development of sustainability disclosure standards.
ACCA fully supports the role of the ISSB (International Sustainability Standards Board) in setting a consistent and comparable global baseline for sustainability reporting around the world.
However, the global accountancy body recognises that Europe's Green Deal may necessitate some further requirements. ACCA is calling on EFRAG (European Financial Reporting Advisory Group) to maximise alignment between the ESRS and the ISSB global baseline.
Yen-Pei Chen, senior manager for corporate reporting, ACCA, says: "Maximum alignment is of paramount importance for investors and other stakeholders to have easily comparable information on sustainability-related issues.
"The cost to companies of sustainability-related reporting and assurance is equally important. Especially for businesses that need to report under both ESRS and ISSB standards."
Businesses that need to report under both standards include European businesses operating internationally, and non-EU businesses with branches or subsidiaries within scope of the corporate sustainability reporting directive (CSRD).
To promote global alignment and facilitate cross-border trade, ACCA is encouraging the European Commission and EFRAG to consider reporting in accordance with ISSB standards as equivalent, when these are supplemented with comparable impact reporting standards such as the GRI standards.
ACCA is concerned about the quantity of disclosures that are required in the draft ESRS. This looks set to prove difficult for the entities within scope, considering the vast amount of information to collect, alongside changes to systems required. Also, it may not lead to more relevant reporting.
This will also affect the companies in the value chain which may be called on to supply information. Many of these will be SMEs which may have limited resources to do so.
Yen-Pei concluded: "There is significant scope for greater alignment between the two sets of standards and this could be achieved in finalising the ESRS. Those affecting the determination of materiality are of particular importance. We urge EFRAG to provide clearer definition and guidance on double materiality: specifically on how impact materiality should be assessed in practice and ensure that the financial materiality is aligned with the ISSB definition."
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