Those who followed the public broadcast of the SR TEG meeting on July 10, 2025, may be surprised that I called the meeting turbulent. In fact, everything went smoothly and calmly that day. The main discussion took place the day before during a closed meeting of the group. That was when the most heated arguments were made, especially on issues where there were many differences of opinion.
The draft standards we have adopted are available on the EFRAG website. Please remember that these are not yet the documents that will be presented for public consultation. They will now go to the SR Board, and only after its decision (and probably some changes) will a version be announced publicly by the end of July. Then everyone will have two months to submit comments on them.
The most important changes in the ESRSs concern several issues:
- The principle of fair presentation has been explicitly introduced into the standards. It was already present in the ESRS (it forms the basis for testing materiality and is also reflected in the qualitative characteristics of information), but now it will be defined and explained explicitly.
- Many requirements have been accompanied by the restriction of undue cost and effort, which will greatly facilitate matters for companies. Unfortunately, although this principle originates from the IFRS system, it is not precisely defined, and only reporting practice will allow for its proper understanding to take shape.
- All disclosures regarding policies, activities, and objectives will be implemented based on the model requirements contained in ESRS 2. They will now be called GDRs (General Disclosure Requirements), but in principle they will be similar to MDRs. There will be no additional data points for them in the thematic standards. For example, standard E2 will include the instruction „describe the pollution policy in accordance with GDR-P.”.
- Voluntary disclosures have been removed from ESRS. These proved to be a problem for companies due to pressure exerted by many auditors.
- Application Requirements will now be located immediately after the Disclosure Requirements to which they relate. No more jumping back and forth between different parts of a given standard to understand what and how to report (I fought for this back in 2022, but it took until now to convince everyone to adopt this layout for standards)!
- Various repetitions and duplicate references to the same issues have been removed. As a result, the standards will be much shorter and easier to read.
- The language has been simplified as much as possible, and many sentences and paragraphs have been rewritten to make the content easier to understand.
- In total, approximately two-thirds of all data points will be removed. However, I would not get too hung up on this artificial statistic, because the number of data points alone does not say anything about their essence.
- The chapter on double materiality in ESRS 1 has been supplemented with additional points discussing the practice of identifying and assessing material impacts, risks, and opportunities. They restore the proper proportions to materiality assessment, which was treated by many as a compliance exercise, whereas it actually belongs to the domain of risk identification and management.
The entire set of ESRSs was submitted by the SR TEG to the SR Board for adoption and public consultation.
During the vote, I was the only member of the TEG who voted against one of the standards. Specifically, it concerns ESRS 1 and the reliefs it contains, which allow for the non-reporting of all or some metrics, including those relating to the company's operating activities. This relief is not time-limited and thus undermines the very essence of the standards. Of course, the vast majority of companies will not apply it, but there will certainly be some „black sheep” who want to hide something and could then take advantage of it. This will be to the detriment of honest companies that take a solid approach to reporting.
The SR Board will likely introduce some further changes to the standards before their publication. I invite everyone to read the new ESRS and participate in the consultations. In future editions of the newsletter, I will also describe some of the more important changes mentioned today in more detail 😊
P.S. What about VSME? The Commission obviously did not manage to publish this „standard” by the end of June, but I have been assured that the work is nearing completion and that it will be announced in the last days of July. There will be no structural changes. However, references to external tools, databases, and sources of information will be removed, with the exception of those from the EU or internationally recognized sources (such as the UN Guiding Principles on Business and Human Rights or the OECD Guidelines for Multinational Enterprises).
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