Sector-Specific ESRS: A Look at EFRAG’s Work

The European Financial Reporting Advisory Group (EFRAG) is developing sector-specific ESRS for relevant economic sectors under the Corporate Sustainability Reporting Directive (CSRD). These standards are intended to help companies disclose industry-specific sustainability information. The following section takes a closer look at the current status of the sector-specific ESRS and the key developments.

Current Status of Sector-Specific ESRSs

In March 2023, the European Commission called on EFRAG to prioritize support for the implementation of the cross-sector ESRS. As a result, however, work on the sector-specific standards was temporarily put on hold. Nevertheless, EFRAG is continuing to develop these standards at the secretariat level with the support of external experts. The following progress has been made to date for the selected sectors:

Oil and Gas: The draft standard was prepared, and the Exposure Draft (ED) was published in September 2024.

Mining, quarrying, and coal mining: The draft was prepared, and the ED was published in September 2024.

Road Transport: The standard is currently in the validation phase. The strategic direction set by the EFRAG Sustainability Reporting Board (SRB) has been implemented since Q4 2024.

Textiles, accessories, shoes, and jewelry: The standard has been in the validation phase since September 2024, with the SRB planning to establish its strategic direction.

Financial Institutions: The work is in an early design and research phase. Training sessions for the governance bodies were scheduled for Q4 2024.

For other sectors, such as agriculture, automotive manufacturing, energy generation and distribution, and food and beverages, work is in its early stages, with no specific timelines currently set for the next steps.

Development Process for Sector-Specific ESRS

The process of developing sector-specific standards involves several phases:

1. Research Phase: Identification and prioritization of relevant sustainability topics, as well as analysis of current disclosure practices.
2. Drafting Phase: Preparation of a working document based on the information gathered and with input from the EFRAG sector community.
3. Validation Phase: Public discussion and validation of the drafts by the EFRAG Sustainability Reporting Technical Expert Group (SR TEG) and the SRB.
4. Approval of the Exposure Draft: Approval of the ED for public consultation by the SR TEG and the SRB.
5. Public Consultation: Soliciting feedback from the public on the draft legislation.
6. Analysis and Revision: Evaluation of the feedback and corresponding revision of the standards.
7. Final Approval: Final approval of the standards by SR TEG and SRB.
8. Finalization: Editorial revision and publication of the technical advisory report for the European Commission.

The development of a single standard can take more than 18 months. EFRAG prioritizes sectors with a significant ESG impact, as well as the role of financial institutions in supporting the goals of the European Green Deal.

Participation of the Sectoral Associations

EFRAG has established sector communities comprising various stakeholder groups, including companies, civil society organizations, and investors. These communities support:

• Identifying relevant sustainability issues for each sector.
• Providing input for the development of the drafts.
• Participation in workshops and consultations during the development process.

Interested parties can join these communities to actively participate in the development of sector-specific ESRSs. Learn more on the official EFRAG website.

Outlook for the Finalization of the Sector-Specific ESRS

EFRAG is consistently pursuing the goal of developing sector-specific guidelines that address the unique requirements and challenges of various sectors. In the coming years, the focus will be on providing companies with precise and practical standards to ensure consistent and transparent sustainability reporting. Sectors with a high environmental and social impact, as well as financial institutions, will be at the center of future work to support the ambitious goals of the European Green Deal.

The active involvement of industry communities and dialogue with stakeholders remain crucial to ensuring that the standards not only meet regulatory requirements but also create added value for businesses and society. The publication of the first sector-specific drafts in September 2024 marked an important milestone that lays the foundation for long-term sustainable business practices in Europe.

Preparing for Sector-Specific ESRS

The sector-specific ESRS present companies with new challenges, but also offer opportunities to strengthen their sustainability strategy and communicate it transparently. This provides significant benefits for both your company and your stakeholders. Do you need support in preparing for and implementing the sector-specific ESRS? Then contact us to schedule a no-obligation consultation.