IRSG Narrative – EU Corporate Sustainability Reporting Directive (CSRD)
15 February 2022
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.
- 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.
- 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.
- 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.
- 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.
- 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
© IRSG - International Regulatory Strategy Group
