If you are heading off on your summer holidays and in search of your next thrilling summer read, look no further than the European Commission's (EC) latest release: the FAQs on CSRD.
That’s right, the EC picked August, the most popular vacation month for Europeans, to drop a 52-page long document including 90 questions and answers that aim to clarify any doubts you may have about CSRD and the related European Sustainability Reporting Standards (ESRS).
It makes for typically bureaucratic timing, if you ask me. As I read the news last week, I immediately imagined the scene in a movie where the big boss about to head on vacation drops a massive pile of papers on some intern’s desk while saying, ‘Here, do some learning!’.
In this case, the Q&A dropped online at a time when, even if you are not on vacation, you probably have more spare time than in any other month of the year. In other words, the EC really wants you to read it. And if you missed it because you were busy sunbathing, it still published it, so it’s on you.
It may be an unpopular opinion, but after this there’s nowhere left to hide from CSRD. It’s probably safe to say the answers to all your questions are in the Q&A and the wealth of information leaves no excuse for confusion about compliance. The EC even says it may update the FAQs document ‘where appropriate’.
But what’s in it? The short answer is: a lot of useful things. More specifically, the white paper includes FAQs around different aspects and requirements of the regulation and it also provides a ‘limited number of clarifications around the interpretation of certain provisions of the first set of ESRS’.
To help you navigate them, the EC has grouped the FAQs into six topics:
- Those related to Article 19a and Article 29a of the Accounting Directive. In brief, the first article introduces CSRD reporting requirements for large companies and some small and medium enterprises, but not micro entities. The latter article outlines the parameters for consolidated sustainability reporting.
- Those related to Article 40a of the accounting directive. This article is about sustainability reports for third-country (non-EU) firms and defines the reporting obligations for subsidiaries or branches in each of the member states where CSRD applies.
- Assurance of sustainability reporting
- Key intangible resources
- Requirements for third-country undertakings
- Sustainable finance disclosure regulation.
If you haven’t gone through it all yet and are wondering whether the document includes any new piece of information or amendments to the legislation, the answer is no.
In fact, the EC says all it wants to do through this set of FAQs is ‘facilitate the compliance of stakeholders with the regulatory requirements in a cost-effective way and ensure the usability and comparability of the reported information on sustainability'.
‘By providing greater clarity and certainty to companies, this set of FAQs will contribute to the commission's objective of reducing administrative burdens on undertakings associated with sustainability reporting,’ reads the white paper.
Indeed, the FAQs document looks like a proper guide for companies and a tool to get rid of any ambiguity or misunderstanding. Among an extensive range of solutions provided in the paper, it includes clarifications around filing deadlines of different reports for scoped-in entities (questions 20 & 39), clarifies taxonomy regulation disclosures even for third-country entities (questions 32-34 and 89), explains the language in which sustainability statements should be issued (question 35) and answers questions on which ESRS should be used for the sustainability report under Article 40a (questions 44-45).
To the white paper’s authors’ credit, anyone uncertain about specific requirements or their relevance to their company can now easily find the answers in this jam-packed document, despite some legal language peppered about.
One may question, however, why the EC has waited so long to publish this document, which is probably what scoped companies have been waiting for. Until now most firms, especially early adopters, have been grappling with the complexities introduced by CSRD, with significant cost involved and with too much room left for interpretation of what the standards require of them. Smaller entities that are scoped in have been panicking about finding the resources to cope with the regime’s requirements.
Of course, a belated effort is better than no effort, but some may question whether the EC truly understands the challenges faced by businesses. Even if you consider the two-year delay the EC agreed on for specific sectors and third-country companies, it may seem it was trying to help, but if you look more closely, it really doesn’t change much for those companies.
What do you think about the FAQs document? Do you find it exhaustive, or do you think it leaves important questions unanswered? Let us know your thoughts via LinkedIn or email me at [email protected].
