15 February 2022

IRSG Narrative – EU Corporate Sustainability Reporting Directive (CSRD)

The IRSG believes that it is essential to implement a balanced application of CSRD requirements to EU and non-EU headquartered internationally active companies and their international activities, in particular to ensure proportionality between EU and non-EU activities.

1. The IRSG welcomes the EU’s efforts on sustainability regulation, and wider ESG regulation, but stresses the need to respect international sustainability reporting standards, and avoid duplication. It is important to remember that financial services providers and multinational corporates will likely be subject to multiple conflicting and overlapping reporting requirements from different jurisdictions.  
2. The IRSG strongly supports the establishment of the International Sustainability Standards Board (ISSB) as a major step to globally aligned ESG reporting. It is positive that the ISSB was endorsed at COP26 by 41 Finance Ministers, including from the UK and EU, and the IRSG hopes that it will provide the foundation for consistent and global ESG reporting standards that will enable companies to report on ESG factors affecting their business. 
3. Under the current proposal, EU and non-EU financial services providers will have to report largely based on estimated data for exposures located outside the EU, which might well represent a sizeable or majority portion of their business. The IRSG strongly believes that this approach risks compromising the accuracy and comparability of reported information, given the current lack of global consensus on the necessary methodology for sustainability data.  
4. This said, the IRSG believes that the EU should focus on driving international support for the ISSB, which may help resolve any concerns about the quality of datasets, especially from non-EU jurisdictions. 
5. The IRSG supports EU subsidiaries of non-EU companies reporting their activities according to the EU standards at the highest EU consolidated level. However, the parent company based in a third country should be allowed to make a single consolidated sustainability report according to the international standards developed by the ISSB or according to its home jurisdiction’s standards that ensure compliance with the ISSB standards.
   

IRSG

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