Corporates are generally welcoming of the new EU regulation, CSRD, but fear the compliance burden, the short time frame for implementation, and some confusion around key concepts will be a maze to navigate.
Speaking on an EY Webinar on the EU Directive, Claudia Hügel, head of ESG ratings and reporting at Deutsche Lufthansa, said: "Most companies do support the concept of having a standard and meaningful structure on how to report and come up with comparable KPIs. No-one wants to do hundreds of ratings and questionnaires."
Letizia Macri, corporate and compliance manager at AVIO, added that the clear and comparable data that will emerge from the reporting will help to prevent 'greenwashing' as it will be more reliable than an ESG rating.
But Macri said that the compliance burden would be particularly heavy for companies who have not had to disclose non-financial information thus far and are now within the scope of the CSRD. She added that SMEs will have to limit their costs while complying with the reporting and auditing requirements.
Hügel expressed her concern that companies felt overwhelmed with 140 disclosure requirements in the ESRS. However she said: "A lot of these requirements are found in all the disclosure concepts we have already, we just need to see where the gaps are."
Hügel also said that 'double materiality' and rebuttable presumptions needed clarification. Saskia Slomp, CEO of EFRAG, the EU's technical adviser on accounting and sustainability standards who designed the ESRS, responded, that rebuttable presumptions simply meant that "you have to assess whether these disclosures are relevant to you and if they are not, then you have to explain why". She added that this was common in financial reporting and essentially a compromise with the EU Task Force who wanted to include mandatory materiality.
However for stakeholders around Europe, this is taking the issue the wrong way around, as those already familiar with integrated reporting believe that it is the materiality assessment that should drive the reporting rather than having everything material unless you can prove it is not.
Regarding double materiality, Slomp said that it is not a new concept as it was included in the CSRD's predecessor, the NFRD, and was also included in the European Green Deal which was first proposed in 2019.