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On May 31, 2024, European Financial Reporting Advisory Group (EFRAG) successfully finalized and published its first three ESRS Implementation Guidance documents, incorporating extensive public feedback and addressing critical aspects of ESRS implementation.


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Let's talk how we can help your business.


Connect to a new world of efficiency by utilizing cleversoft’s business solutions.

Contact us

On May 31st, 2024, European Financial Reporting Advisory Group (EFRAG) successfully finalized and published its first three ESRS Implementation Guidance documents, incorporating extensive public feedback and addressing critical aspects of ESRS implementation. These finalized documents (EFRAG IG 1 to 3) are:

In the following cleversoft will summarize some of the highlights from the IG 2 and IG 3 guidelines, as these are the once our cleversoft Standard CSRD Service focuses on.

EFRAG Implementation Guidelines 2: Value Chain 

The Guide is designed to help entities navigate the complex aspects of reporting sustainability information related to their value chains. It addresses the full spectrum of the value chain, excluding the entity’s own operations.

  1. Materiality and Value Chain Inclusion:

    • Entities are not required to include value chain information in all disclosures, only in those where the value chain impacts are material and connected to the entity’s operations through business relationships.

    • The guidance provides a detailed framework for assessing material IROs in the value chain, including where these impacts are likely to materialize across geographies, activities, sectors, and business relationships.

  2. Reporting on Policies, Actions, and Targets (PATs):

    • Specific guidance on how to report on policies, actions, and targets that involve actors in the value chain is included, emphasizing the need for transparency in how these address material upstream and downstream IROs.

  3. Metrics and Data Collection: The guidance discusses the inclusion of value chain data in metrics where relevant and the use of estimation techniques when direct data collection is not feasible.

    • Metrics Calculations: Most metrics under the sector-agnostic ESRS primarily cover the reporting entity’s own operations. The following Metrics cover upstream and downstream Value Chain:

      • Disclosure Requirement ESRS E1-6 Gross Scopes 1, 2, 3 and total GHG emissions;

      • Disclosure Requirement ESRS E1-7 GHG removals and GHG mitigation projects financed through carbon credits; and

      • entity-specific disclosures where the undertaking determines whether and, if so, what VC information is required.

    • Operational Control

      • Environmental Standards: Operational control aligned with GHG Protocol is a relevant concept within the ESRS. For banking and insurance companies, the concept of operational control primarily pertains to their investment portfolios and any directly managed properties or facilities. Operational control is defined as the ability to direct the operational activities and relationships of an entity, site, operation, or asset, aligning with the GHG Protocol. This definition is crucial when assessing which assets or investments should be included in the GHG emissions reporting.

      • Social Standards: Operational control does not apply to Social standards S1, S2, S3, S4.

    • GHG Emissions

      • Scope 1 and 2: Direct emissions from owned or controlled sources, and indirect emissions from the generation of purchased energy. For banks and insurers, this usually includes emissions from physical operations like branches and data centers.

      • Scope 3: Covers other indirect emissions, such as those stemming from investment activities. For financial institutions, Scope 3 includes emissions linked to their investment decisions, notably those from businesses they invest in but do not control operationally. This could encompass emissions from funded projects or companies within their investment portfolios.

    • Financial control approach

      • ESRS use a financial control approach while the GHG Protocol allows for three possible reporting approaches. In order to provide further information, ESRS requires separate disclosures about the emissions from items under operational control. The requirement to disclose emissions separately from items that are not financially controlled but that are under the operational control of the reporting undertaking provides a full picture of the impacts of the undertaking.

  4. Handling of group situations, specifically with regards to associates and joint arrangements, is addressed with emphasis on their impact on sustainability reporting under the European Sustainability Reporting Standards (ESRS). The reporting entity must include impacts from associates and joint ventures when these entities are involved in the value chain. This inclusion covers the full scope of the entity’s operational influence, not just proportional to its share of ownership.

    • Extended Reporting Obligations: The involvement of associates and joint ventures in the reporting entity’s value chain, especially as suppliers or customers, requires these entities to report on sustainability matters that are materially impacted by these relationships.

    • Entity-Specific Disclosures: When associates and joint arrangements are part of the value chain, the reporting entity must provide disclosures that are tailored to the specific nature of the risks, opportunities, and impacts arising from these relationships.

  5. Transitional Requirements: The transitional provisions aim to give companies time to adapt to the new ESRS reporting requirements, especially concerning the complex task of integrating value chain information. These provisions are generally applicable for the first three years of reporting under ESRS, allowing companies to gradually build their reporting capabilities.

    • During the first three years, companies are permitted to limit the amount of value chain information they report.

    • Companies are expected to make reasonable efforts to gather necessary data from their value chains. If complete data is not available, companies must explain the efforts made to obtain the data, the reasons for any shortfalls, and their plans to improve data collection in future reports.

EFRAG Implementation Guidelines 3 – CSRD Data Points overview

EFRAG Implementation Guidelines 3 (IG3) includes a list of ESRS datapoints created using the same methodology as the draft ESRS Digital taxonomy to maintain consistency. However, since the IG3 list is designed to be human-readable, it differs in some details from the digital ESRS XBRL taxonomy. These differences are detailed on page 9 EFRAG IG 3 List of ESRS Data Points – Explanatory Note

CSRD Service offering by cleversoft

At cleversoft, we closely monitor the regulatory developments related to the CSRD and ensure that these are implemented in the CSRD service. cleversoft is already finalizing the service implementation based on the current regulatory status and is preparing for the first clients onboarding.

Our team of CSRD specialists is actively involved in all relevant workshops and events, including those hosted by efrag, to acquire firsthand insights that inform our service’s continious enhancement.

We offer a holistic 360-degree service designed to guide financial institutions through the complexities of the CSRD. For more information about our CSRD Services, we invite you to explore our website.