The European Financial Reporting Advisory Group (EFRAG) has appointed Chiara Del Prete as EFRAG Sustainability Reporting TEG (EFRAG SR TEG) chair.
- Chiara Del Prete’s role is to lead and manage all EFRAG’s sustainability reporting technical activities.
- EFRAG provides technical advice to the European Commission on accounting matters and is responsible for the development of sustainability reporting standards.
- It has taken a different approach from the US body in charge of outlining sustainability reporting standards, which poses challenges in ensuring there is consistency across jurisdictions.
Del Prete was already serving this role since May 2022 as acting chair. Her job is to lead and manage all EFRAG’s sustainability reporting technical activities.
The EFRAG SR TEG advises and makes recommendations to the EFRAG Sustainability Reporting Board. The Board decides on EFRAG’s technical positions, primarily on the technical advice submitted to the European Commission in the form of draft EU Sustainability Reporting Standards.
Del Prete continues to chair the International Forum of Accounting Standard Setters, which covers both financial reporting and sustainability reporting.
What does Del Prete plan to do in her post?
Del Prete said that the Corporate Sustainability Reporting Directive (CSRD) dictates the EFRAG SR TEG timeline and work plan. The group has around 40 sector standards to cover, which are key to complementing the standards issued in 2022.
Small and medium enterprises are also a priority, she said, with two different focuses: a mandatory standard for the listed and a voluntary standard to support the inclusion of the smallest entities in the sustainability journey.
She added: “We also expect to support interpretation and implementation of our standards, an essential element for their correct functioning and success.”
What does EFRAG do?
EFRAG was established in 2001 by the EU and the private sector to provide technical advice to the Commission on accounting matters. It was also charged with providing input into the development of IFRS sustainability standards.
In April 2021, the Commission adopted a legislative proposal for a CSRD that requires companies within its scope to report using a double materiality perspective in compliance with European Sustainability Reporting Standards (ESRS).
Under the proposed CSRD, EFRAG was appointed technical adviser to the European Commission developing draft ESRS. Its role was later extended to provide technical advice to the Commission in the form of fully prepared draft sustainability reporting standards and/or draft amendments.
Differences in approach to the US
In developing these standards, EFRAG has taken the approach of including the impact of corporate activity beyond the enterprise. In the US, the International Sustainability Standards Board (ISSB), which was launched by the International Financial Reporting Standards (IFRS) Foundation, has been focused more on enterprise value.
As such, the IFRS’ approach is around the financial impact of climate, biodiversity and other risks on business operations, rather than looking at wider systemic risk. While there was a shift in October 2022 when the ISSB said that it include Scope 3 emissions in its reporting standard, there is still quite a difference between the two approaches.
Del Prete commented: “We are committed to avoid double reporting to the extent possible and to support companies internationally. We are in regular contacts with the US. We are monitoring their developments and as soon as there will be clarity on their content, we will start working on interoperability, similarly to what we are doing with the ISSB.”