ESG Reporting: Understanding the 12 standards proposed by EFRAG

12 sustainability reporting standards were proposed at the EFRAG General Assembly and presented to the European Commission at the end of November 2022. The content is intended to be more “material” and as consistent as possible with the ISSB. Additional sector-specific standards are forthcoming. The publication of the delegated acts for these standards is scheduled for June 2023. This article helps you understand these standards in a few minutes.

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Results of the public consultations

Analyzing the consultations carried out during the summer of 2022 has allowed EFRAG to identify points of concern expressed by various stakeholders, in particular

  • Alignment with the ISSB standards
  • The inclusion of the value chain (upstream and downstream) in the scope of reporting
  • The volume of data to be provided
  • Consideration of human rights, in line with the OECD principles and other reference frameworks supported by the European taxonomy (in particular the United Nations Guiding Principles)

Consideration of comments in the review of the 12 standards

In response, EFRAG has undeniably been open to listening and learning. Indeed, contrary to the previous working versions of the different standards, the versions proposed to the European Commission for consultation with EFRAG’s public authorities members and analysis of various European legislators include the following changes:

  • Massive reduction (about 50%) of the number of requirements and data. Some requirements have been deferred to future sectoral standards or dropped because they were either relevant only to certain sectors or too granular, by country or activity
  • Removal of the “rebuttable presumption” principle, i.e. the obligation for companies to have to “justify or explain the omission of certain information”. On the one hand, there will be a list of mandatory indicators in the standards, necessary for compliance with various regulations that apply to financial institutions (e.g. SFRD). But beyond that, the company will have to conduct a double materiality analysis and select the relevant information to share or not. The elimination of the “rebuttable presumption” principle will no longer impose an obligation to explain
  • Alignment with ISSB and TCFD. EFRAG has modified the structure of the standards to align with the ISSB and TCFD frameworks, in order to have comparable systems. Specifically, the information will be divided into four similar pillars for ease of reading: Governance; Strategy; Impact, Risk and Opportunity Management; and Data and Objectives.

An international reference that learns from past mistakes in ESG reporting

3 major advances

This version of the standards is interesting in the sense that it draws lessons and allows us to further develop the relevance of ESG reporting at three levels

  • Integration of SMEs in ESG reporting. One of the main weaknesses that the CSRD will seek to address is to significantly broaden, beyond large groups, the integration of companies into a unified ESG reporting system. By simplifying the amount of data, these standards take an essential operational step towards achieving this objective.
  • Relevance of ESG reporting. The implementation of the NFRD in 2014 had been the subject of endless debate among proponents of mandatory reporting – at the risk of drowning relevant information in a useless mass at some companies. This was, for example, rather the approach chosen in France at the time with an imposed set of 42 indicators. And the advocates of a laissez-faire approach to corporate responsibility – at the risk of missing out on essential subjects. This was the approach chosen in Denmark in 2014, relying on multi-stakeholder dialogue to identify sectoral material topics. Neither approach has proven credible in ensuring ESG reporting that is fully satisfactory in its relevance and conciseness. EFRAG proposes a hybrid scheme that mixes certain mandatory indicators with some freedom of interpretation by drawing lessons from overly dogmatic approaches.
  • Comparability of ESG data. EFRAG is obviously under pressure to put in place a framework adopted by European companies, anxious to work with reporting systems that are comparable with what will be adopted in Europe and outside Europe. The proposed step towards the TCFD and the ISSB allows us to allay fears and move ESG reporting beyond theoretical debates on the role of ESG in society or in the service of the investor’s decision.

Also, in the context of COP 27 (climate) and COP 15 (biodiversity), the ESRS E1 standard provides a framework for companies to develop a robust system for climate transition plans aligned with the Paris Agreement and the GHG Protocol, even more precisely than the CSRD on the subject. The ESRS E4 also offers, for the first time, a biodiversity standard, based on materiality and aligned with the work of the TNFD. Finally, the ESRS S1-4 standards provide de facto reporting that covers a range of topics expected under different legislations on duty of care (France, Germany, Norway in particular).

To go further: Access the 12 standards proposed by EFRAG

It contains twelve standards covering successively

1. Cross-cutting issues

2. Environmental Issues

3. Social issues

4. Governance issues

What are the next steps?

Four topics remain to be refined in the coming months.

1. Human rights. Ongoing discussions on the Corporate Sustainability Due Diligence Directive will clarify the scope of reporting and governance issues. The provisions on value chains have been revised to clarify the approach and focus on material information, but more details will come with the complementary sector standards

2. Non-sector standards. Standards for listed SMEs will also be developed, as well as guidelines for other SMEs who wish to apply them on a voluntary basis;

3. Sectoral standards. Standards will be developed for ten sensitive sectors by the end of 2023, with the goal of covering 40 sectors within three years

4. Entity-specific standards: companies will have to take into account non-sectoral and sectoral standards, but also perform a materiality analysis to identify whether there are impacts, risks and opportunities that are specific to them but not covered by the standards.


EFRAG is obliged to evaluate every three years the need to revise the standards, in accordance with international developments and new legislations, while continuing to produce increasingly granular and specific standards. The application of these standards is structured, in coherence with what is planned for the CSRD, to penetrate the business fabric in phases over 3-5 years. Thus, between now and 2030 or so, the strengthening of these standards will undeniably create a period of instability for companies.

Ksapa has developed an expertise of several decades in the calibration and reporting of financial and non-financial information. Our team mobilizes concrete methodologies of evaluation and critical analysis to help the various economic actors to align themselves with the requirements of the current reporting systems. We are working to align the EU taxonomy, the SFRD and the NFRD/CSRD with detailed knowledge of other regulatory requirements – SEC in the United States, for example – in order to help your teams better mobilize liquidity. It is on these issues that we will be able to guide the efforts for companies to adapt to the environmental, social and ethical challenges of the coming years.

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Author of several books and resources on business, sustainability and responsibility. Working with top decision makers pursuing transformational changes for their organizations, leaders and industries. Working with executives improving resilience and competitiveness of their company and products given their climate and human right business agendas. Connect with Farid Baddache on Twitter at @Fbaddache.

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