GRI has written to EFRAG to provide recommendations on how ‘simplification’ of the European Sustainability Reporting Standards (ESRS) can be most effectively achieved – without undermining the quality and relevance of corporate reporting.

EFRAG has been mandated by the European Commission to significantly reduce the required disclosures in the ESRS, as part of the Omnibus legislative changes to the Corporate Sustainability Reporting Directive (CSRD). Their public call for input on ESRS revisions closed on 6 May, ahead of delivering technical advice to the Commission by the end of October.

In a joint letter to EFRAG, GRI CEO Robin Hodess and Carol Adams, Chair of the Global Sustainability Reporting Board (GSSB), set out that removing ESRS datapoints not covered by the GRI Standards would achieve a reduction in disclosures of at least 30%, according to GRI’s initial assessment. Not only would this approach help EFRAG in addressing simplification aims, it would support continued alignment between the ESRS and widely-adopted sustainability reporting standards.

The letter stresses the importance of three key considerations for the simplification process:

1. Europe needs to remain a global leader in promoting the green economy: The Green Deal is a critical competitive advantage for the EU – and the CSRD must remain an important policy lever in the sustainability transition.
2. Effective corporate reporting is a key enabler for sustainable development: Reporting on impacts as well as financial information reinforces the raison d’ être of the CSRD – recognizing that a ‘double materiality’ approach is a driver of business resilience and a sustainable economy.
3. Simplification is welcome – if it is defined, applied and managed well: Arbitrary cuts to disclosures would create confusion and dilute coherence for corporate reporters – and their stakeholders. Focusing simplification efforts on the reporting of the most significant impacts is an opportunity to integrate the ESRS into an emerging global reporting system.

They also set out practical considerations for how the simplification process can be achieved, based on GRI’s extensive experience in sustainability reporting standards:

• Enhance interoperability with global reporting standards: Building on GRI and EFRAG’s fruitful partnership, and given that the GRI standards are the most prevalent in sustainability reporting across the EU, aligning with the structure and presentation of the GRI Standards will lower the cost of implementation.
• Ensure any reduction in mandatory data points does not lose the focus on impact: Preserving the core of the information based on impact disclosures drawn from GRI Standards will achieve a significant reduction in disclosures – with companies that wish to go beyond ESRS’ concise standards able to leverage the GRI Standards.
• Retain a combination of quantitative and qualitative data points: A reduction in disclosures should not disproportionately affect qualitative disclosures, given the mix of the two is highly valued by both report preparers and information users to deliver decision-useful information.
• Provide clearer instructions on applying the materiality principle: Encourage the approach that a company starts by first identifying and describing their most significant impacts, then how these impacts can be used to understand risks and opportunities, and how they are managed. This assessment is already applied by most leading companies and is a well-established practice based on the GRI Standards.

Robin Hodess said: “We urge EFRAG to retain the foundational strengths of the ESRS, which position Europe as a global leader in sustainability reporting. The simplification agenda needs to strengthen rather than undermine high-quality reporting. By focusing on the reporting of most significant impacts and enhancing interoperability with existing and widely adopted standards, such as GRI’s, the EU can shape a truly integrated, global system of sustainability reporting – which would benefit all stakeholders.”

Carol Adams said: “The GSSB is a strong supporter of the CSRD approach of identifying impacts as the starting point for reporting on impacts, dependencies, risks and opportunities. GRI co-constructed the ESRS with EFRAG and the GSSB stands ready to continue the collaboration through the revision process, with the aim of ensuring that corporate reporting in the EU provides a meaningful basis for accountability and decision-making, while contributing towards sustainable development aligned with our global standards.”