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CSRD Hub Newsletter #1

February 2024


Welcome to the first edition of the CSRD HUB Newsletter. 


In this issue, we will look at some of the most noteworthy developments of the past month with regards to CSRD and also introduce the CSRD Hub.

MEPs approved a two-year delay in developing sector-specific sustainability reporting standards and those for companies from outside the EU


The Committee on Legal Affairs (JURI) of the European Parliament (EP) approved the postponement of sector-specific ESRS adoption from June 2024 to June 2026.


However, MEPs (Members of the European Parliament) believe that sector-specific sustainability standards enable comparisons between companies and are therefore valuable sources of information for investors. That is why, although they agree with the delay, they also suggest that the Commission publishes eight sector-specific reporting standards as soon as they are ready before the deadline.

Regarding the two-year delay of the reporting obligations for non-EU companies, this was specifically agreed with the purpose of giving the non-EU companies a better timeline for getting ready for the requirements. The original deadline for the non-EU companies was June 2024 and considering the detailed requirements from CSRD, companies needed more time to get ready. Many companies identified huge gaps in their processes and type of data required, so this is the time to fill those gaps. 

Our recommendation would be to definitely look at the time as a gift to get the pieces in place. If you're getting started, or helping a client get started, the best advice we can give is to bring finance, audit, sustainability and others together to get the right team in place, and move forward on double materiality and the beginning data inventory. This is the only way to be fully prepared with all data and processes and to be ready with CSRD reporting in advance of the new deadline.

A Christmas surprise from EFRAG: 3 Implementation Guidance proposals for ESRS


The European Financial Reporting Advisory Group (EFRAG) published the first three draft Implementation Guidance (IG) documents for the European Sustainability Reporting Standards (ESRS) just before Christmas. 


The Draft EFRAG IG 1 addresses the requirements for the materiality assessment in ESRS. The Draft EFRAG IG 2 covers the value chain aspects in the Standards, while the Draft EFRAG IG 3 includes the detailed ESRS data points as a Microsoft Excel workbook with an accompanying explanatory note.


The guidance documents form part of EFRAG’s implementation support activities. These include issuing non-authoritative implementation guidance and other material to support the application of the 12 sector agnostic ESRS, which were adopted as delegated act on 31 July 2023. 


1️⃣ Draft EFRAG IG 1: Materiality Assessment Implementation Guidance (MAIG)


IG 1 describes the reporting requirements on the materiality assessment with examples of possible steps. It also contains FAQs on the double materiality assessment to provide implementation guidance from a practical perspective.


This Guidance is particularly helpful as the ESRS do not mandate a specific process or sequence of steps to follow when performing the materiality assessment. So this is left to the judgement of the reporting organization. This is because no one process would suit all types of economic activity, organisational structure, location of operations or upstream and downstream value chains of all organizations applying the ESRS.


The Standards provide an example of materiality assessment that would meet the ESRS requirements.


This could include the following steps:


  1. understanding the context;

  2. identification of actual and potential IROs related to sustainability matters;

  3.  assessment and determination of the material IROs related to sustainability matters; 

  4. reporting.


Note that this is not the only possible approach to implement the ESRS requirements.


As the ESRS start to apply in relation to the 2024 financial year to the first group of companies, the Guidance acknowledges that market practice is currently developing for double materiality assessment. Sustainability statements prepared using ESRS are not yet available.


Link: here


2️⃣ Draft EFRAG IG 2: Value Chain Implementation Guidance (VCIG)


IG 2 describes the reporting requirements on the value chain (VC) during the materiality assessment, for impacts, risks and opportunity management as well as metrics and targets. It also discusses the reporting boundary of the group for sustainability reporting including operational control. The VCIG also contains FAQs to provide further information and the 'value chain map' summarises the VC implications per disclosure requirement. This guidance should be read together with the MAIG.


Structure of the guidance


  • Introduction

  • Navigating value chain under CSRD and ESRS: how to navigate VC requirements in ESRS which is the basis for the rest of the document.

  • FAQs: this chapter covers how an undertaking may implement VC under ESRS by using frequently asked questions to provide practical guidance.

  • VC Map: The last chapter includes the ‘upstream and downstream VC map’ that explains the coverage of the upstream and downstream VC as required by ESRS excluding considerations of entity-specific disclosures and SFDR indicators.


Note that the Guidance covers organizations’ upstream and downstream value chain and NOT its own operations. 


ESRS require that the sustainability statement include information about all material impacts, risks and opportunities (IROs) including those that arise or may arise in the context of its business relationships in the upstream and downstream value chain. The reason for this is that the major impacts of an organization often occur in its upstream or downstream VC rather than in its own operations.


What is the difference between a value chain and a supply chain?


In short, the VC includes the supply chain. The supply chain includes the actors in the VC upstream from the reporting entity, such as suppliers who provide products or services that are used in the development of the undertaking’s products or services)


However, the VC also includes downstream entities along with the supply chain. Entities downstream from the undertaking, such as distributors, customers and waste management, receive products or services from the undertaking.


Link: here


3️⃣ Draft EFRAG IG 3: Detailed ESRS Datapoints Implementation Guidance


IG 3 presents in an Excel format the complete list of all disclosure requirements in sector agnostic standards. The Excel file covers all the standards, except ESRS 1 General Requirements, as it does not set specific disclosures. The Guidance is aimed at supporting organizations in their preparation of the first sustainability statement according to the ESRS. 


This list can form the basis of a data gap analysis.   


Appendix A of the document explains the differences between this list in Excel and the future draft ESRS Digital taxonomy. Note that this list does not represent the digital ESRS XBRL taxonomy and cannot be used as the basis for the preparation of the machine-readable sustainability reporting.


Appendix B provides statistics on the datapoints:


  • 176 datapoints are mandatory irrespective of the materiality assessment; 

  • A further 647 datapoints are subject to the materiality assessment

Link: here


Another gift from the EFRAG: three mapping tables to facilitate interoperability between the ESRS and other standards have been published


1️⃣ ESRS and GRI Standards


The mapping tool sets out how the disclosure requirements and datapoints in each set of standards relate to each other. The tool emphasizes the high degree of commonality already achieved and lays down solid foundations to build a reciprocal digital taxonomy.


Link: here


2️⃣ ESRS and IFRS S2 Climate-related Disclosures


The mapping tool illustrates the high level of interoperability achieved and can assist preparers and users in identifying the ESRS information corresponding to IFRS S1 & S2 requirements in relation to climate.


Link: here


3️⃣ ESRS and Taskforce on Nature-related Financial Disclosures (TNFD)


This [draft] mapping tool helps entities understand the commonalities between the TNFD-recommended disclosures and ESRS. It lists the ESRS disclosure requirements that map to the ones recommended by TNFD, supporting interoperability.


Link: here

EFRAG launches public consultation on SME standards


The EFRAG announced its public consultation on the two Exposure Drafts on sustainability reporting standards for SMEs. The consultation period will run until 21 May 2024. The EFRAG invited all stakeholders to provide comments through the online consultation questionnaires. 


1️⃣ Exposure Draft ESRS for listed SMEs (ESRS LSME ED)


The purpose of the ESRS LSME ED is to set reporting requirements that are proportionate and relevant to the scale and complexity of the activities and to the capacities and characteristics of LSMEs. 


This is expected to support LSMEs in getting better access to finance and avoid discrimination against them on the part of financial market participants, as it will enable the availability of standardised sustainability information.


2️⃣ Exposure Draft for the voluntary reporting standard for non-listed SMEs (VSME ED)


This Exposure Draft proposes a simple reporting tool to assist non-listed micro-, small- and medium-sized enterprises (non-listed SMEs) in responding to requests for sustainability information that they receive from business counterparts, such as banks, investors or larger companies for which non-listed SMEs are suppliers in an efficient and proportionate manner as well as to facilitate their participation in the transition to a sustainable economy. 


Based on market acceptance, the VSME ED is expected to standardise the current multiple ESG data requests, which represent a significant burden on non-listed SMEs, by reducing the number of uncoordinated requests they receive. This is expected to support them in having better access to lenders, investors and clients.


Click here for more.


EFRAG launches workshops on its draft sector classification


EFRAG will hold a series of online workshops in February 2024 to collect feedback on the current version of the draft ESRS – SEC1 Sector Classification, which is expected to be shared for consultation in the coming months.


These ESRS identify the perimeter of activities that are to be aggregated into industry sectors. 


They also deliver guidance to companies 


(i) to apply the Disclosure Requirement SBM – 1 (strategy, business model and value chain) in the ESRS issued as Delegated Act in July 2023

(ii) to identify the future sector-specific draft ESRS that will be relevant for them.


The Draft ESRS SEC 1 builds on the existing NACE Rev. 2-1 classification system (Nomenclature générale des Activités Economiques dans les Communautés Européennes), categorising the NACE business activities by ESRS sectors based on common characteristics of sustainability impacts, risks and opportunities.


The sector classification is based on the following considerations:


i.The business activities determine the sector group the undertaking is operating in and determine business relationships and value chains.

ii. The business relationships and value chains determine the specific impacts, risks and opportunities of the sector the undertaking is operating in.

iii. The impacts, risks and opportunities determine the undertaking’s sustainability matters.

iv. The undertaking’s sustainability matters determine the undertaking’s disclosure requirements


Click here for more.



Our CSRD HUB will bring together global professionals who are implementing CSRD for their companies and clients. Joining the HUB will help you become an expert in the field by gaining an in-depth understanding of the standards and learning best practices. 


Through our monthly newsletter, we will keep you informed about new regulations, guidances, tools, and other materials. Our exclusive webinars will help you make sense of the details and content that EFRAG provides for ESRS implementation.


Earth Academy provides in-depth learnings, tools, and templates through the CSRD Hub.

📌 Here is the recording of our recent webinar on Double Materiality in CSRD.





📌To become an expert in implementing ESRS to comply with CSRD, refer to our Expert package where you will get advanced training on CSRD plus access to exclusive benefits.














📌Keep an eye out for our in-depth training on Double Materiality implementation as well as a comprehensive Materiality Tool that can be practically used for the Materiality process.

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Earth Academy has worked with many leaders and advisors as they build capacity to lead companies on their CSRD reporting journeys. For more information on how we can help, see CSRD HUB.

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