A five-point plan for an improved sustainability reporting
Transparent sustainability reporting that is available to all market participants needs clear standards. The insurance industry sees five points that should be considered in the current deliberations.
The political agreement on the EU's Corporate Sustainability Reporting Directive (CSRD) is excellent as it creates a stable environment for elaborating the European Sustainability Reporting Standards (ESRS). This task falls to the European Financial Reporting Advisory Group (EFRAG), a private consulting body in the field of accounting standards established with the encouragement of the European Commission. After a public consultation on its first set of draft standards, EFRAG is currently assessing the feedback by different stakeholders and is working on a finalised version of the ESRS.
From the insurance industry's perspective, there are five clear-cut points that can help tailor the standards to the needs of both the creators and the users of such reports.
- To begin with, only the most important sustainability data should have to be disclosed; then the scope should be broadened from there. We propose to prioritise climate reporting and data according to the Transparency and Taxonomy directives; the advantage is, the Taxonomy directive already contains a core set of criteria in the ESG categories S and G. They can be extended step by step from there.
- One size does not fit all: The reporting standards are planned to apply to companies from all sectors. But with 137 disclosure requirements that doesn't always make sense. Sector-specific standards might just be better suited to ensure relevant disclosures in each and every case.
- Companies need to be able to decide for themselves which activities are relevant to sustainability and which ones are not. They are in the best position to determine what information is essential to the different stakeholders.
- The value chain needs to be defined on a pragmatic basis. Insurance companies manage millions of assets and insurance policies. A comprehensive overview of all activities within this value chain can be very difficult to obtain and lead to significant challenges with regard to data availability.
- The EFRAG standards should be closely aligned with ISSB standards (ISSB: International Sustainability Standards Board) to avoid contradictory requirements and discrepancies between the European and the global system.
Take a look at the complete paper here.