The European Central Bank published its staff opinion on the revised European Sustainability Reporting Standards (ESRS), warning that several of the measures put in place to ease sustainability reporting requirements for companies under the EU’s Omnibus process will “significantly reduce transparency for investors and other market participants.

Noting the Omnibus’ process’ removal of approximately 90% of companies from the scope of the Corporate Sustainability Reporting Directive (CSRD), the ECB staff also suggested using the revised ESRS as the basis for voluntary sustainability reporting, in place of the current voluntary sustainability reporting standard for SMEs (VSME), which it said was “developed for a very different purpose.”...

While welcoming several of the simplifications to ease the implementation of the new reporting requirements and add clarity to the standards, the ECB staff highlighted several areas for improvement “to ensure that the revision strikes the right balance between the need for simplification and the need to preserve the EU policy objectives of the CSRD,” with key focus areas including the permanent relief measures, phase-ins and exemptions from disclosure requirements, interoperability with international standards such as the IFRS Foundation’s ISSB standards, and concerns around the revised ESRS’ appropriateness for disclosures by banks and financial firms...

One of the key concerns raised by the ECB staff related to the “long list of permanent reliefs and phase-in provisions applicable to many disclosure requirements, as well as certain explicit and implicit exemptions for the financial sector,” which the publication warned “will significantly reduce transparency for investors and other market participants, as well as negatively affecting the overall availability and comparability of financial risk-relevant information necessary for adequate risk management and financial stability purposes.”...