While EFRAG was working on drafts of the first twelve ESRS standards, the IFRS Foundation's International Sustainability Standards Board (ISSB) was creating the S1 and S2 standards. These are intended to be the beginning of a set of standards that will constitute the basic minimum level of mandatory sustainability reporting in various countries around the world.
Although the two organizations (EFRAG and IFRS, and in practice SR TEG and ISSB) maintained ongoing contact during the development of the standards, the standards are not identical. First of all, the ESRS is based on the principle of dual materiality, while the IFRS standards are limited to a financial materiality perspective only. In addition, the ISSB has developed only one thematic standard, on climate change issues, while at EFRAG we have created a set of standards on all environmental, people, society and governance topics.
In practice, this means that a company preparing an ESRS-compliant report that also wants it to be compliant with IFRS S1 and S2 must note certain differences. Sometimes they require certain information to be supplemented, and sometimes they need to be described in a different way. Reconciling reporting the other way around (starting with IFRS and wanting to conform to ESRS) is essentially impossible, unless we are concerned with matching the content of the climate change disclosures themselves.
On May 2, 2024, EFRAG's Sustainability Reporting TEG adopted the document ESRS - ISSB Standards Interoperability Guidance. At the same time, the ISSB board has also adopted the document. With this publication, the process of agreeing on the content of the reports will be tidier and a little easier than if everyone had to compare the two sets of standards on their own. Unfortunately, the simplicity of the process is hard to talk about, since Interoperability Guidance is a document as long as 33 pages (that is, it is only 5 pages shorter than the entire ESRS E1 standard). I would also like to remind you about the conference that the European Commission is organizing on May 16, 2024 from 9:00 am to 1:00 pm: Supporting companies in applying the European Sustainability Reporting Standards. The conference framework and registration form are available on this page. Registration for in-person participation is already closed, but the conference will be streamed online. I encourage you to sign up and participate. I will have the pleasure of discussing in the first panel on the needs of companies for support in implementing reporting in accordance with ESRS standards.
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