EFRAG Q2 2024 Implementation Notes – Challenges & GAP Analysis

Last week, EFRAG released its highly anticipated Q2 2024 Implementation Notes Report, which provides valuable insights into the preliminary practices and challenges faced by institutions in implementing the European Sustainability Reporting Standards (ESRS). This comprehensive report encompasses a diverse sample of 28 large institutions, spanning various sectors and including both financial institutions (FIs) such as banks, insurers, and asset managers, and non-financial institutions (non-FIs) from industries like healthcare technology, chemicals, road transport, textiles, and utilities. The findings offer a detailed look at the current state of ESRS implementation, providing a crucial benchmark for organizations as they navigate this complex regulatory landscape.

This is the first article in a series of three focused on the EFRAG ESRS implementation notes survey. The initial article provides an in-depth look at how companies can begin the process of implementing the European Sustainability Reporting Standards (ESRS) by conducting a comprehensive GAP Analysis. This foundational step involves assessing what information and datapoints a company currently has, identifying the necessary additional information and datapoints required to meet ESRS standards, and determining who within the organization is responsible for providing and collecting this data.

A crucial aspect of starting the ESRS implementation is understanding the need for IT transformation, as acknowledged by 85% of the surveyed undertakings. Effective ESRS reporting requires robust systems for data collection, management, and reporting. Companies need to consider system integrations, which may involve using connectors, open APIs, or manual data input methods to gather relevant data from various sources. This IT transformation ensures that all necessary information is efficiently captured and accurately reported in compliance with ESRS requirements.

Mapping data into specific datapoints and delegating tasks are critical steps in the ESRS implementation process. It requires teams to meticulously map existing data to the required ESRS datapoints, ensuring that each piece of information is accurately represented. Delegating work across different teams helps in distributing the workload and ensuring that subject matter experts are involved in the data collection and reporting processes. This approach not only streamlines the reporting process but also ensures that the data collected is comprehensive and reliable.

Leveraging advanced platforms like the Sustainability Network SaaS can significantly enhance the efficiency of information collection and reporting. Such platforms offer automated information collection through various means, including connectors for different software systems, open APIs, and file upload capabilities. By automating these processes, the platform can allocate specific datapoints to different teams within the organization, ensuring that each team is responsible for their relevant data, thereby improving accuracy and accountability.

Finally, it is essential for companies to adopt reporting standards that are both compliant with ESRS and customized to reflect the organization’s specific realities. While adhering to the standardized requirements is crucial, companies must also ensure that their reports accurately represent their unique circumstances and sustainability initiatives. Customizing the reporting standards helps in providing a true and fair view of the organization’s sustainability performance, making the reports more meaningful and useful to stakeholders.