Representatives from retail investor and consumer groups argued, during an EFRAG outreach event, that the draft European sustainability reporting standards (ESRS) will overwhelm businesses due to the time pressure and volume of reporting required of companies.
The draft standards currently require companies already in the scope of the Non-Financial Reporting Directive (NFRD) to start reporting in 2024. Ben Granjé, CEO of the Individual Investor Federation of Belgium/Flanders, questioned the necessity of this time pressure considering the complexity and size of the project and he called for a "scalable implementation" of the standards to help companies to adjust.
Bryan Coughlan, financial services officer at The European Consumer Organisation (BEUC), said: "The very tight schedule that EFRAG is exposed to right now, may lead to us implementing a system that will cost us even more time down the line."
In addition, they argue that businesses will be overburdened with reporting because every disclosure is deemed material for all companies unless a company provides evidence that a particular disclosure is not material.
This system of companies' rebutting particular disclosures is known as 'rebuttable presumptions' and has been criticised by stakeholders at a previous outreach event for being too complicated.
Coughlan describes rebuttable presumptions as "the burden of explaining noncompliance", which he argues could be problematic as this burden would be time consuming and expensive as it would require legal teams.
Granjé agreed that the burden would be too heavy on the reporting entities and added that the workload for EFRAG to read every rebuttal would be "incredible". He suggested "shifting (the standards) from general to sector specific" to reduce the burden on companies and EFRAG.
Coughlan agreed: "Rather than the rebuttable presumption, we would use EFRAG's amassed expertise and neutrality to actually define on a sectoral level, what is material."
However, Magdalena Kuper, head of sustainability at BVI Deutscher Fondsverban, disagreed with Ganjé and Coughlan on the topic of refutable presumptions. She argued that the concept was not new and has been used in financial disclosures for years and that sector-specific approach to standards wouldn't work for every company.
