Better competitiveness through lean sustainability reporting

In its position paper ‘Boosting Europe's Competitiveness by Cutting Red Tape’ published today, Deutsches Aktieninstitut argues in favour of reducing the data points in sustainability reporting from 1,100 to around 500 data points and abolishing the electronic labelling requirement for information in financial and sustainability reporting.

‘Europe's competitiveness suffers from the granular and complex reporting obligations of companies on sustainability. We therefore welcome the omnibus procedure initiated by the EU Commission to streamline and simplify the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the Taxonomy Regulation,’ explains Henriette Peucker, Chief Executive and member of the Board of Deutsches Aktieninstitut. ‘The CSRD and the associated European Sustainability Reporting Standards (ESRS) are pivotal for sustainability reporting. We propose that no requirements be placed on corporate reporting beyond the CSRD. All information for other reporting frameworks such as the Sustainable Finance Disclosure Regulation (SFDR) will be derived from the CSRD data,’ says Peucker. 

In addition to the texts identified by the EU Commission for the OMNIBUS, Deutsches Aktieninstitut also addresses the Disclosure Regulation (SFDR), the Regulation on the European Single Electronic Format (ESEF) and the Deforestation Regulation in its position paper. If there are other texts and standards that require ESG data, the CSRD data collection should also be sufficient for these.

It is crucial for the success of the omnibus process and the competitiveness of the European Union that the EU Commission takes greater account of the corporate perspective when revising the reporting. This will have a positive impact on the practicality of reporting regulation and strengthen companies' commitment to the goal of transformation.

Our most important recommendations for the omnibus procedure are:  

• Removal of the electronic tagging requirement (iXBRL tagging) of the ESEF Regulation for financial and non-financial reporting. Tagging is complex, causes a great deal of effort for companies and creates legal uncertainty without any additional benefit for the public. Sophisticated AI tools can now also extract, interpret, and evaluate the reported information from PDFs without having to rely on electronic labelling in accordance with iXBRL.

• Reduction of data points: As an alternative to the current 1,100 data points, we propose replacing the ESRS Set 1 with either the standard for the listed, small, and medium-sized enterprises (LSME standard), which comprises approximately 500 data points, or a similarly sized framework of reduced data points that applies equally to large listed and unlisted companies. 

• No sector-specific standards: The sector-specific standards developed by EFRAG should not be pursued. Frameworks such as SASB, which was adopted in IFRS S2, already provide sufficient guidance on sector-specific aspects.

‘In view of economic prosperity and the goal of transformation, it is time for the European Union to recalibrate the legal framework for sustainability reporting. Companies’ resources should be channelled into transformation and not get stuck in compliance,’ emphasizes Peucker. 

The position paper ‘Boosting Europe's Competitiveness by Cutting Red Tape’ is complemented by our detailed policy recommendations in our position paper ‘Making Omnibus a Success’, which was also published today.