EFRAG: Latest CSRD Q&A Publication and final taxonomy approval

In July 2024, European Financial Reporting Advisory Group (EFRAG) published an updated Q&A Technical Explanations adding 25 new entries and compiling all explanations from February to July 2024. For more details, see our previous blog post.

Additionally, on July 17, EFRAG held a meeting to approve taxonomy changes. The final taxonomy is not yet available but will be published in Q3 2024. For more information on the proposed updates, please check our blog post.

In the following article, we highlight key points from the Q&A guidelines and taxonomy updates, focusing on data and calculations for financial institutions covered by our cleversoft Standard CSRD Service.

Question ID 29 and 261 – mandatory data points

• EFRAG clarified the use of the terms ‘shall’ and ‘may’ disclose, particularly concerning the materiality assessment. Generally, ‘shall’ means obligatory data points and ‘may’ means voluntary data points. However, this needs to be considered in conjunction with Company’s materiality assessment and the type of the data point, such as those related to ESRS 2 General Disclosures or Minimum Disclosure Requirements. which fall outside of materiality assessment. The ESRS standard allows flexibility in materiality assessment: the undertaking is not required to disclose a ‘shall disclose’ datapoint that is not material.
• cleversoft’s standard CSRD service offers flexibility during onboarding, allowing clients to define which standards and sub-standards are material, ensuring only required data points are validated.

Question ID 863 – asset portfolio calculations and averaging

• EFRAG mentions that ESRS standard will not require averaging of the value chain calculations across quarters, as is the case for SFDR reporting (Article 6 of Commission Delegated Regulation (EU) 2023/363).
• cleversoft will provide a flexible solution, allowing clients to choose between using end-of-year or quarterly values for Value Chain calculations. cleversoft recommends SFDR clients with PASI Statement to use the yearly average over all four quarters to keep consistency of their reported numbers across different reports.

Question ID 910 – Application of phase-in provisions for Scope 3 clarified

• EFRAG confirms that the disclosures regarding Scope 3 calculations are required from the first reporting in 2025 and are not subject to phase-in provisions mentioned in ESRS1 paragraphs 132-135, since they are derived from other EU legislations (as per ESRS2 Appendix B). The only exception is for companies with fewer than 750 employees during the first year.
• cleversoft already supports Scope 3 calculations for Value Chain, which are also used in other reports such as the SFDR PASI statement.

Question ID 733 – Overlap of ESRS2 and topical standards

• EFRAG confirmed that for Minimum Disclosure Requirements repeated in both ESRS2 and in the topical standards, the information should not be repeated in the Sustainability statements. Undertakings may use references in their statements to link between ESRS 2 and topical standards. Additionally, expected changes in the taxonomy will remove duplicate metrics in these areas.
• cleversoft monitors taxonomy updates and will incorporate the changes in the CSRD Service. Our service requires information provision only once, allowing the same information to be reused throughout the narrative report or referenced between chapters.

Question ID 422 and 555

• EFRAG provided further explanation on disclosures in E1-9 regarding assets at risk. When identifying the amount and share of current assets that may be at risk, the time horizons (short-, medium- and long-term) should be considered. If applying different scenarios or if there is higher uncertainty on assets at risk in the medium- or long-term, the disclosure can be provided as a range. The undertakings shall consider proportionality principle in providing these disclosures. Additionally, EFRAG clarified that E1-9 requires presenting the exposures to climate risks rather then expected impacts (damages).
• cleversoft’s CSRD offering facilitates presentation of information in different disaggregation, allowing numbers to be provided as single values or ranges.

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 cleversoft standard CSRD service. We are finalizing the service implementation based on the current regulatory status and preparing for the first client onboarding.

Our team of CSRD specialists is actively participates in all relevant workshops and events, including those hosted by EFRAG, to gain firsthand insights that inform our service’s continuous 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.