CDP and EFRAG to team up on the European Sustainability Reporting Standards
Last month CDP announced that EFRAG and CDP have joined forces to promote the use of consistent and effective sustainability reporting standards across Europe’s financial markets.
EFRAG’s (European Financial Reporting Advisory Group) mission is to serve the European public interest in both financial and sustainability reporting by developing and promoting European views in the field of corporate reporting. EFRAG developed the European Sustainability Reporting Standards (ESRS). The parties obligated by these standards are:
- EU companies that meet at least two of the three criteria: more than 250 employees, more than $43 million in revenue or more than $22 million in total assets.
- And Non-EU parent companies whose securities are listed on EU-regulated markets with EU revenue of more than $161 million.
First, let’s recap what is the ESRS and CDP, before we review the impact of this partnership.
What is the European Sustainability Reporting Standards (ESRS)
Developed by EFRAG, the European Sustainability Reporting Standards (ESRS) are the future European ESG reporting guidelines . This series of new standards aims to improve corporate sustainability reporting on a European scale by promoting better transparency, harmonization, and standardization of companies’ non-financial reporting. This will make it easier to compare the extra-financial reports of various European companies. This ESRS brings a double obligation for companies, starting in 2024 companies will need to:
- Report on how they expect climate change to affect their operations.
- Report on how their operations will impact climate change and what they are doing to mitigate the impacts.
What is CDP
CDP is a global non-profit that runs an environmental disclosure system for companies, cities, states, and regions to manage their environmental impacts. CDP scores are widely used to drive investment and procurement decisions toward a zero-carbon, sustainable, and resilient economy.
What is this cooperation going to bring
This cooperation will increase transparency and accountability: the adoption of standardized sustainability reporting is anticipated to improve transparency in companies’ environmental and social impacts, helping investors and stakeholders make more informed decisions.
This cooperation will also drive further the climate transition: indeed, by working together, EFRAG and CDP aim to encourage widespread adoption of these standards across Europe, thereby influencing how companies report their sustainability-related information, which could have positive effects on investment decisions and corporate ESG practices.
According to CDP’s communication, the companies will start to:
- Explore and implement alignment of its disclosure system with the ESRS.
- Accelerate the implementation of the Standards.
- Offer webinars and detailed technical guidance materials to support companies’ reports on ESRS.
- Maximize the alignment of CDP’s reporting standards with the EU’s.
- Support companies globally to prepare for regulatory requirements.
CDP’s role will be more of a support role to help educate and guide companies with these new reporting obligations.
In conclusion, this cooperation will push for further transparency and accountability of European companies that will have to report under the ESRS. This joining of forces sets a distinct direction towards climate transition.
How we can help
Companies falling under the ESRS can use market-based solutions to mitigate their emissions and, by extension their reporting. Indeed, the European Commission declared that Energy Attributes Certificates, such as Guarantees of Origin (GOs), are aligned with the EU taxonomy and therefore can be used to prove the use of renewable energy.
The Guarantees of Origin certify that the electricity comes from renewable sources; one certificate equals one megawatt hour of renewable electricity injected into the power grid. Nvalue is an accredited services provider of CDP. We have a vast portfolio of GOs, with a wide choice in terms of technology, origin and quality. Contact us if you want to discover more about how we can help you to get the best energy mix according to your needs and to start your sustainability journey.