Business and financial leaders call for the timely development of EU sector-specific standards for sustainability reporting

Finding meaningful solutions to global environmental and social challenges requires collaboration between business, civil society and policy makers. In this respect, the European Union has shown global leadership in improving corporate sustainability reporting, a central tool to set direction for business transformation and greening finance. 

The EU Corporate Sustainability Reporting Directive charted the path for the development of European Sustainability Reporting Standards with the objective of providing clarity and legal certainty, levelling the playing field, and increasing the relevance, reliability and comparability of disclosures.

The undersigned commend the European efforts and work accomplished so far in the promotion of sustainable finance and responsible business, and stress the importance for the EU to continue the development of sector-specific reporting standards. These are essential to clarify the requirements and expectations for companies' disclosures based on their industry, facilitate the reporting exercise and thereby reduce costs.

As of 2024, large companies in Europe will start to apply the first set of EU sustainability reporting standards, which cover general disclosures on strategy, governance and business model as well as reporting on environmental, social and human rights topics.

The EU standards require companies to identify and report on all their material impacts, risks and opportunities. However, some major sustainability issues are specific to individual sectors in which companies operate. Such sector-specifications are not yet provided for in the first set of adopted standards, therefore imposing unnecessary burden on companies to determine and justify what is material.

The EU Corporate Sustainability Reporting Directive envisaged a plan to overcome this problem, as it requested the European Commission to adopt sector-specific standards in order to clarify information that companies are to report and pay attention to when it comes to risks and impacts prevalent in each sector.

Furthermore, companies’ sustainability reporting is required to be assured. This makes specifying sectoral information even more critical, as it informs the assurance process by acting as a guidance for both preparers and assurers.

Finally, the work undertaken in the European Union has influenced and sparked global discussions to standardise companies’ sustainability reporting. It is important that the European Union continues to provide global leadership and drive coherence in international developments, taking into consideration and building upon the work that other initiatives are undertaking at sector-specific level. 

We urge the European Union not to lose sight of the technical work for sector-specific standards, as they represent the most effective way to tackle the challenges that will arise in the application of reporting obligations and general standards. Developing the sectoral specifications in a timely manner will ensure adequate engagement and consultation with business and civil society experts. Attention should be paid to ensuring coherence with good practice, recognised initiatives, as well as reporting and regulations stemming from other pieces of legislation.

This is of critical importance to address challenges and uncertainties currently faced by companies, as well as to ensure meaningful sustainability disclosures. We stand ready to contribute to this important work and look forward to learning the next steps of the EU Commission and the European Financial Reporting Advisory Group.

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