If you are heading off to or on your summer vacation and in search of the next thrilling read, look no further than the European Commission's (EC) latest release: the FAQs on CSRD.
That’s right, the commission picked the popular vacation month of August to drop a 52-page document including 90 questions and answers that aim to resolve any doubts you may have about CSRD and the related European Sustainability Reporting Standards (ESRS).
The Q&A appeared online at a time when, even if you are not on vacation, you have probably more spare time than in any other month of the year. In other words, the EC really wants you to read it.
But what’s in it? The short answer is: a lot of useful things. The guidance includes FAQs around different aspects and requirements of the regulation and provides a ‘limited number of clarifications around the interpretation of certain provisions of the first set of ESRS’.
To help you navigate them, the EC has grouped the FAQs into six topics:
- Those related to Article 19a and Article 29a of the Accounting Directive. In brief, the first article introduces CSRD reporting requirements for large companies and some small and medium enterprises, but not micro entities. The latter article outlines the parameters for consolidated sustainability reporting
- Those related to Article 40a of the accounting directive. This article is about sustainability reports for third-country (non-EU) firms and defines the reporting obligations for subsidiaries or branches in each of the member states where CSRD applies
- Assurance of sustainability reporting
- Key intangible resources
- Requirements for third-country undertakings
- Sustainable finance disclosure regulation.
If you haven’t gone through it all yet and are wondering whether the document includes any new piece of information or amendments to the legislation, the answer is no. In fact, the EC says all it wants to do through this set of FAQs is ‘facilitate the compliance of stakeholders with the regulatory requirements in a cost-effective way and ensure the usability and comparability of the reported information on sustainability.’
‘By providing greater clarity and certainty to companies, this set of FAQs will contribute to the commission's objective of reducing administrative burdens on undertakings associated with sustainability reporting,’ reads the white paper.
Indeed, the FAQs document looks like a proper guide for companies. An extensive range of solutions provided in the paper includes clarifications around filing deadlines of different reports for scoped-in entities (questions 20 & 39), clarifications concerning taxonomy regulation disclosures even for third-country entities (questions 32-34 and 89), explanations of the language in which sustainability statements should be issued (question 35) and answers to questions about which ESRS should be used for the sustainability report under Article 40a (questions 44-45).
One might ask, however, why the EC has waited so long to publish this document. Until now most companies, particularly early adopters, have been grappling with the complexities introduced by CSRD and associated costs and uncertainties. Some smaller entities have been panicking about finding the resources to cope with the new requirements.
Of course, a belated effort is better than none, but some may question whether the EC truly understands the challenges faced by businesses. Even if you consider the two-year delay the EC agreed on for specific sectors and third-country companies, it may seem the authorities were trying to help but if you look closer it really doesn’t change much for those companies.
What do you think about the FAQs document? Do you find it exhaustive, or do you think it leaves important questions unanswered? Let us know your thoughts via LinkedIn or email me at noemi.distefano@irmagazine.com.
