CDP, EFRAG Collaborate for European Sustainability Reporting Standards

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by | Nov 9, 2023

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The European Financial Reporting Advisory Group (EFRAG) and CDP will collaborate toward aligning the CDP environmental and sustainability disclosure system with the European Sustainability Reporting Standards (ESRS), also working to accelerate market readiness for the new disclosure rules.

Through the collaboration, EFRAG will provide technical expertise and guidance as CDP works to incorporate the ESRS into its disclosure system. CDP will also offer webinars and technical guidance materials to help companies report on key ESRS data points through the CDP platform.

Increasing Number of Companies Prepare for Disclosures

Currently, more than 23,000 companies, representing nearly 90% of European market value, use CDP disclosure systems to monitor environmental impacts through a voluntary system. Data from such disclosures is widely used by financial institutions, policymakers, and other worldwide organizations to track and improve corporate environmental progress.

The European Commission adopted the ESRS in July of this year, and starting in January 2024, the standards will apply to around 50,000 businesses. The legally-enforced standards will require companies to report on climate change, pollution, water and marine resources, biodiversity and ecosystems, and resource use.

“With the bar now being raised globally in respect to environmental disclosure, our collaboration with EFRAG will ensure companies preparing to report can do so through CDP,” said Maxfield Weiss, executive director of CDP Europe. “The ESRS are a watershed — an obligation for thousands of companies inside and outside the EU to report how they impact climate change, pollution, water, and biodiversity.”

Standards Evaluate Companies’ Environmental Impact, Aim to Prevent Greenwashing

According to the European Commission, the ESRS is being implemented as a part of the European Green Deal in order to assess how large companies are performing sustainability-wise.

ESG reporting requirements have increased as governments worldwide set carbon reduction targets and strengthen environmental protection standards. Reporting standards have also increased as a measure to reduce greenwashing or false sustainability claims. The EU has announced plans to ban greenwashing and improve corporate transparency, especially as consumers indicate an increased preference for sustainable products and services.

“Only with robust environmental data can financial markets and other stakeholders identify businesses with credible plans to reduce their impacts so that they thrive in a zero-emissions, nature-positive future,” said Patrick de Cambourg, chair of the EFRAG Sustainability Reporting Board. “This means companies reporting not only how climate change may affect their value, but also how they affect the environment.”

Many companies reportedly feel unprepared to address new disclosures, and CDP aims to provide support for companies as they work to adhere to new regulations.

 

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