I mentioned this last issue in my previous newsletter. A change in the emissions calculation standard is ultimately intended to improve the quality of data published by companies and used by its recipients, such as investors or public authorities. However, applying an amended version of a standard also comes with costs. People need to be trained, calculation methods must be changed, and new data must be collected. Some companies will implement these changes with a delay, some may stick to the old methodology, while others may abandon emissions reporting altogether. As a result, a data gap will emerge in the market: some companies will report “the old way”, others “the new way”. Therefore, the benefit of introducing a new, more accurate calculation method should be compared not only with the cost of implementing new rules at individual companies, but also with the cost of this data gap for users.
In the case of individualisation of standards, we are dealing with yet another type of calculation. Individualisation occurs when one binding standard is replaced by several. This is exactly the situation resulting from the Omnibus: almost all large enterprises that were required to report in accordance with the ESRS standards are released from this obligation. Some of them will not undertake reporting, but some (we do not yet know how many) will decide to prepare reports voluntarily. They may do so using any standard they choose. Some will opt for simplified ESRS, others for GRI, IFRS, SASB or VSME. How should the costs and benefits be assessed?
From the perspective of an individual company, the possibility to choose a standard seems advantageous. I can select a standard that suits me, that I am familiar with, and for which I already have a data monitoring and reporting system in place. If I have not reported before, I can choose a simpler standard or be guided by the expectations of my investors and other stakeholders.
From the perspective of the entire market, however, the picture looks different. Banks and investment funds will not obtain comparable data, because reports will be prepared in accordance with different standards. As a result, they will have to turn to professional data providers. These firms will source part of the data from various types of reports or by asking companies to complete specific questionnaires. This obviously generates costs, both for financial institutions (the need to purchase data) and for companies (the labour-intensive completion of questionnaires).
The use of multiple standards also prevents the harmonisation of assurance practice. Audit firms must maintain larger teams, and market-wide standardisation of assurance practices does not occur as quickly as it would under a single standard. This, in turn, also represents a cost for companies, because audits take longer and involve numerous discussions between the reporting team and the statutory auditor. Other stakeholders, meanwhile, will spend more time searching for the information they are interested in within reports, since these reports have different structures and different disclosures – often similar, but never exactly the same.
One of the main arguments for adopting the CSRD in 2022, which introduced uniform standards, was the reduction of costs for the entire market. Based on fairly detailed analyses, it was concluded at the time that the benefit of reducing these costs outweighed the sum of the individual costs incurred by companies. By proposing and subsequently adopting the Omnibus, the Commission, Parliament and Council adopted a different perspective: only the costs borne by individual companies matter, while the additional costs incurred by all market participants (including companies themselves) are disregarded.
What can be done about it? In the short term and from the perspective of a single company, only two things:
- Choose a standard that meets the expectations of the broadest possible group of report users
- Organise the data monitoring system in such a way that it can generate responses to different questionnaires from various stakeholders without additional effort
And in the longer term? Much more can be done to ensure that reporting ceases to be a cost for companies and becomes a simple, largely automated activity, while at the same time improving competitiveness and access to finance. But that is a topic for another issue of the newsletter 😊
Polish 
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