"Future EU sustainability standards: NGOs welcome the final recommendations of EFRAG’s Project Task Force for the European Commission", 8 March 2021

Following the presentation of the Green Deal, the European Commission confirmed the EU’s ambition to reform the EU Non-Financial Reporting (NFR) Directive and develop accompanying EU standards. EFRAG was subsequently mandated to set up a Project Task Force (PTF) to advise the European Commission on the ideal content and structure of such standards. Six months after the selection of its members, the PTF has published its final recommendations. The Alliance for Corporate Transparency welcomes and supports the PTF’s work and - at least in principle - its final advice to the European Commission.

The research and studies published by the Alliance highlight major gaps in current reporting practices as companies disclose general and vague information instead of qualitative, comparable and decision-useful data and insights. 

Clarifying thematic reporting requirements, in particular on climate risks, targets and transition plans, human rights due diligence, and on impacts across the value chain, is the only way to ensure that companies and their boards focus on relevant data and that investors and banks have access to relevant and comparable information needed for their decision-making.

EU standards play a critical role in this regard. The recommendations of the Project Task Force can successfully guide the EU standard-setting process, and significantly advance the quality of corporate sustainability transparency.

Below, we provide an overview and reflections on the most important recommendations for the success of the work of the future EU Standard Setter (ESS). 

1. Quality criteria to be followed by the ESS and reporting entities...
2. Double-materiality application...
3. Levels of reporting and standards setting...
4. Value chain...
5. Forward-looking information...
6. Priorities & Roadmap...
7. Complementary recommendations on areas for improvement 

The current categorisation of topics is one of the PTF recommendations we believe might require a more nuanced approach. Categorising topics under the ESG nomenclature can be confusing; certain issues fall under different categories (e.g. often the case for human rights and environmental due diligence). As such, in the case of components E (environment) and S (social), we would advise a more nuanced definition of topics [...] that more adequately reflects the nature and interconnectivity of relevant impacts and risks faced by companies; and which we believe would not contradict the PTF’s recommendations, but rather fits into the already robust system described in the report.