Europe’s sustainability reporting rules (ESRS/CSRD) are at risk of becoming a 𝗰𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝗲𝘅𝗲𝗿𝗰𝗶𝘀𝗲 — complex, costly, and symbolic — while non-EU competitors avoid these burdens. This “feel-good” path could undermine both 𝘀𝘂𝘀𝘁𝗮𝗶𝗻𝗮𝗯𝗶𝗹𝗶𝘁𝘆 and 𝗰𝗼𝗺𝗽𝗲𝘁𝗶𝘁𝗶𝘃𝗲𝗻𝗲𝘀𝘀.
In our feedback to EFRAG & the EU, we argue for:
✔️ 𝗖𝗹𝗲𝗮𝗿 𝗿𝗲𝘃𝗲𝗻𝘂𝗲-𝗯𝗮𝘀𝗲𝗱 𝗮𝗰𝗰𝗼𝘂𝗻𝘁𝗶𝗻𝗴 𝗿𝘂𝗹𝗲𝘀 — accountability where decisions are made
✔️ 𝗖𝗼𝗻𝘀𝗲𝗻𝘀𝘂𝗮𝗹, 𝘀𝘁𝗮𝗻𝗱𝗮𝗿𝗱𝗶𝘇𝗲𝗱 𝗘𝗦𝗚 𝗞𝗣𝗜𝘀 — comparability without clutter
✔️ 𝗠𝗮𝘁𝗲𝗿𝗶𝗮𝗹𝗶𝘁𝘆 𝗮𝗽𝗽𝗿𝗼𝗮𝗰𝗵𝗲𝘀 𝘁𝗵𝗮𝘁 𝗺𝗮𝗸𝗲 𝘀𝗲𝗻𝘀𝗲 — impact materiality pre-defined by society (“no” entity-level materiality), complemented by options that allow a strategic fit instead of one-size-fits-all
✔️ 𝗦𝗶𝗺𝗽𝗹𝗲 𝗿𝘂𝗹𝗲𝘀 — fostering innovation and growth, not box-ticking
𝗧𝗵𝗲 𝗣𝗜® 𝗩𝗮𝗹𝘂𝗲 & 𝗥𝗶𝘀𝗸 𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸 → link impacts to financial value, risk & opportunity
𝗧𝗵𝗲 𝗣𝗜® 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝘆 𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸 → align ambition levels with business strategy
Previous PI comment about the European Sustainability Reporting Standards (ESRS) Draft of the European Financial Reporting Advisory Group (EFRAG)
We advice EFRAG to standardize sustainabilty performance and not its management!
Define selected mandatory sustainability indicators, ideally on activity level, to be reported along the value chain based on their absolute impacts on society – irrespective of an entity’s materiality judgement, with clear thresholds like 50 g CO2e/1 € revenue. Entities should be furthermore required to report these in an aggregated way (cradle-to-gate scope). In addition, consider working towards monetization factors to quantify the related impacts on society in monetary terms. Such indicators can, however, be complemented with related optional KPIs to be used in integrated reporting that links financial and sustainability performance.
Require the disclosure of the strategic intent und give the freedom to declare all other disclosure requirements (materiality, governance, strategy, risk, and opportunity management) as not applicable based on their imperative. This also means to delete the rebuttable mechanism.
Vermeiden Sie standard-induzierte "Nur-PR"-Ansätze, indem Sie die Wesentlichkeitsanalyse auf der Grundlage der strategischen Absicht freiwillig machen, mit "einfacher" oder "doppelter Wesentlichkeit" als optionale Definitionen, damit diese kongruent zur Wesentlichkeitsphilosophie des Managements/der Strategie der Firma ist. Wenn sie nach dem ESRS erstellt werden, sollten Materialitätsmatrizen die Hauptdimensionen "Auswirkungen auf die Gesellschaft" (y-Achse) und "Auswirkungen auf das Unternehmen" (x-Achse) sowie die Unterdimensionen tatsächliche vs. potenzielle Auswirkungen auf das Unternehmen (z-Achse) enthalten. Bestimmungsmethoden und Grenzwerte sollten nicht vereinheitlicht werden. Die Dimensionen sollten entsprechend umbenannt werden, da beide Begriffe und Definitionen („impact materiality“ und „financial materiality“) irreführend und unvollständig sind (siehe unser Papier What‘s material?!).
Reasoning: In essence, sustainability/ESG is about changing the way business is done and not about reporting; this should be the guiding principle for any sustainability standard. To date, strategies and management approaches are not standardized to ensure competition and provide organizations with a necessary level of freedom, including the decision of some organizations to comply only with legal regulations. Any standard that suggests an organization should be doing more risks producing standard-driven “Only-PR” approaches. Instead, it could be more efficient for governments to create incentives for the market to reach a sustainable development that maximizes Societal Value. A global standard that determines the principles and rules for accounting Societal Value KPIs would be a step forward for measuring and comparing an organization’s sustainability performance. Relatedly, the identification of material topics and KPIs should be coupled with the organization’s management strategy. The ESRS should define core metrics on activity level for sustainability performance and reporting, including the upstream value chain for selected indicators. This enhances transparency, as outsourcing a certain production step may be a feasible approach to fool the primary users of a report. You can find PI’s complete response -
PI comment about the International Financial Reporting Standards (IFRS) S1 Draft of the International Sustainability Standards Board (ISSB)
We advice the ISSB to standardize sustainability performance and not its management.
definieren Sie verbindliche Nachhaltigkeitsindikatoren, idealerweise auf Aktivitätsebene , die entlang der Wertschöpfungskette auf der Grundlage ihrer absoluten Auswirkungen auf die Gesellschaft berichtet werden. Darüber hinaus sollten auf Monetarisierungsfaktoren hingearbeitet werden, um die damit verbundenen Auswirkungen auf die Gesellschaft in monetärer Hinsicht zu quantifizieren
verlangen Sie die Offenlegung der strategischen Absicht (Imperativ) und geben Sie die Freiheit, bestimmte Offenlegungspflichten aufgrund der Absicht als nicht anwendbar zu erklären.
Wesentlichkeitsmatrizen sollten teilweise standardisiert werden, wobei die Hauptdimensionen Auswirkungen auf die Gesellschaft (y-Achse) und Auswirkungen auf das Unternehmen (x-Achse) und die Sub-Dimensionen tatsächliche vs. potenzielle Auswirkungen auf das Unternehmen ("z") festzulegen sind. Bewertungsmethoden und Cut-offs sollten nicht standardisiert werden
stellen Sie sicher, dass die Wesentlichkeitsdefinition im Bericht mit der des Managements der Organisation übereinstimmt. Bitte geben Sie den Organisationen daher die Freiheit, für ihren ISSB-Bericht zwischen einfacher und doppelter Materialität zu wählen. Allen eine Definition aufzuzwingen, wäre ein staatlich gesteuertes Management.
Reasoning: In essence, sustainability/ESG is about changing the way business is done and not about reporting; this should be the guiding principle for any sustainability standard. To date, strategies and management approaches are not standardized to ensure competition and provide organizations with a necessary level of freedom, including the decision of some organizations to comply only with legal regulations. Any standard that suggests an organization should be doing more risks producing standard-driven “Only-PR” approaches. Instead, it could be more efficient for governments to create incentives for the market to reach a sustainable development that maximizes Societal Value. A global standard that determines the principles and rules for accounting Societal Value KPIs would be a step forward for measuring and comparing an organization’s sustainability performance. Relatedly, the identification of material topics and KPIs should be coupled with the organization’s management strategy. The ISSB standard should define core metrics for sustainability performance and reporting, including the upstream value chain for all indicators. This enhances transparency, as outsourcing a certain production step may be a feasible approach to fool the primary users of a report. Read the full PI response -
