E3G’s response to the consultation on the draft Delegated Act containing the ESRS

EU flags in front of European Commission in Brussels
EU flags in front of European Commission in Brussels. Photo by mbruxelle on Adobe Stock.

This is E3G’s response to the open consultation on the draft Delegated Act containing the European Sustainability Reporting Standards (ESRS) by the European Commission on 7th July 2023.

The disclosure standards fall under the Level 1 legislation Corporate Sustainability Reporting Directive (CSRD) and are meant to mandate companies and financial institutions to start reporting information on ESG-related matters under a double materiality basis, increasing transparency and clarity of data provided to investors. However, the latest amendments proposed by the Commission have worryingly backtracked on the technical work delivered by the European Financial Reporting Advisory Group (EFRAG).  

The new set of disclosure standards fails to sufficiently advance precise, reliable and comparable information on businesses’ impact on the people and the environment, and on the financial consequences arising from climate change.  

Under the Delegated Act, the ‘always-to-be-disclosed’ nature of all climate disclosure requirements has been removed, therefore subjecting all climate-related data points to materiality assessment. Companies reporting under ESRS will assess which sustainability information it deems material and disclose the data only when material. Such an easing of requirements would negatively impact the credibility of ESRS as a reporting standard, as well as reliability of reports produced accordingly across the EU market.  

Maintaining a full set of ESG-related disclosures and establishing a working sustainability reporting framework in the European market is the most cost-effective way to channel investments towards sustainable business practices. 

E3G has developed four recommendations for the Commission:  

  • Re-introduce set of mandatory, or to be precise ‘always-to-be-disclosed’ disclosure requirements. We consider fundamental to request transition plans, climate targets and GHG emissions to always be reported irrespective of materiality
  • Re-introduce ‘always-to-be-disclosed’ clause for data points present in existing EU legislation particularly for the principal adverse impact (PAI) indicators mandated by the SFDR; 
  • Remove additional two-year phasing for companies with less than 750 employees for biodiversity and social standards
  • Reconsider the decision of reporting specific biodiversity and social indicators as voluntary

E3G appreciates the Commission’s efforts in aligning the ESRS closely with the recently published ISSB standards (i.e., IFRS S1 and S2). We believe that all the recommendations above can be implemented whilst maintaining the definitions in the draft Delegated Act that would allow for interoperability to be ensured. 

The feedback to the Delegated Act will now be analysed by the Commission for potential amendments to the final version. Next, the ESRS will undergo a two-month ‘accept or reject’ scrutiny period between the European Parliament and the Council.  

Read our full consultation response with further crucial comments and recommendations on the ESRS here.

Furthermore, CSRD and ESRS are expected to affect U.S. investors and certain issuers listed and traded on U.S. markets. To leverage the extraterritoriality factor, E3G joined up with U.S. stakeholders to urge the European Commission to retain their initial proposal for having certain disclosures, (e.g., Scopes 1, 2 & 3 GHG emissions, transition plans and climate targets) on an “always-to-be-disclosed” basis. The U.S. Securities and Exchange Commission (SEC) has been urged to take the same approach.


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