Proposed reliefs to firms disclosing under Europe’s Corporate Sustainability Reporting Directive (CSRD) would compromise the future flow of quality data to investors, according to Europe’s insurance and pensions regulator (EIOPA).
EIOPA said plans to offer relief to firms on account of “undue costs or efforts” on the provision of sustainability-related data related to own operations should be proportionate and temporary, lapsing after three years.
“A permanent relief would not satisfy investors’ needs and ability to seek improvements, as such a solution lacks incentives for undertakings to collect sustainability data related to their own operations,” said the regulator, adding that its proposed time limit would also ensure interoperability with the disclosure standards of the International Sustainability Standards Board.
The comments were part of an opinion provided to the European Commission on technical advice on the amended European Sustainability Reporting Standards (ESRS) from the European Financial Reporting Advisory Group (EFRAG).
EFRAG revised the reporting standards in line with the Omnibus 1 Directive, which reduces the scope of sustainability information required to be disclosed under CSRD, as well as the scope of firms falling under the new rules.
From 2028, companies with a net turnover exceeding 450 million, and an average of more than 1,000 employees, are due to report under the revised CSRD rules.
EIOPA said it “fully supports” the simplification efforts in the draft revisions to the ESRSs, welcoming efforts to improve readability for preparers and users, and to reinforce the role of materiality.
“It is important to ensure key quantitative sustainability data is made available by undertakings to users, including pension funds and insurance undertakings,” it said.
Earlier this month, the European Central Bank raised similar concerns, noting that the introduction of multiple reliefs, phase-ins and exemptions “will limit the availability of meaningful data and hamper the comparability of disclosures across companies”.
The removal of incentives to improve data collection and methodological efforts by reporting firms would run contrary to the CSRD objective of generating a reliable, consistent and comparable data ecosystem, said the bank.
“Transparent, comparable, and reliable sustainability information is critical for providing insights into financial risks, effectively guiding capital flows and supporting a smooth transition to a sustainable economy and the fulfilment of the EU’s Paris Agreement commitments,” it added.
