COP29: CDP and EFRAG announced important news regarding corporate climate reporting: two organisations have confirmed significant commonality between CDP’s environmental data questionnaire and the European Sustainability Reporting Standards (ESRS) from the EFRAG. This breakthrough will ease the reporting process for companies and will advance sustainability reporting standards while enhancing the EU’s Corporate Sustainability Reporting Directive (CSRD).
The new joint initiative is a major step in harmonising international standards for reporting on climate around the world, with a mapping guide to be published early next year. Subsequent aligning will make corporate reporting requirements simpler, which could reduce the burden companies face while offering consistency and environmental data.
Key Takeaways and Next Steps
It marks material changes in the climate data reporting of corporations due to collaboration between CDP and EFRAG. The elaborate mapping exercise by CDP and EFRAG revealed that the CDP climate disclosure questionnaire falls broadly within the scope of the ESRS climate standard, ESRS E1. Overlap will ensure that the reporting and transparency needs of companies reporting under the ESRS E1 are taken care of by CDP efficiently and vice versa, thus supporting the “write once, use many” principle espoused by CDP.
The partnership is timely because European regulations increasingly call for standard reporting on environmental, social, and governance (ESG) issues. CDP and EFRAG align their reporting frameworks toward alleviating the two pressing concerns of the business world: how simple reporting requirements can be made and how companies can comply with European climate and sustainability standards. This could make reporting easier and more accessible for companies that wish to enter European and international markets.
Full guidance on mapping will be issued in early 2025, enabling companies to clearly follow the roadmap in aligning their CDP disclosures with ESRS standards. The document is to be devised to lead companies through compliance procedures in an effort to minimize redundancy and inefficiency in the process.
Roles and Activities of EFRAG in Advancing Transparency and Compliance
As the leading developer of European sustainability standards, the work of EFRAG has centered on building high-quality, accessible ESG data frameworks. A big component of CSRD will be new reporting requirements by companies guided under ESRS to improve transparency and accuracy in the reporting of environmental impact. The collaboration between EFRAG and CDP works towards improving the interoperability of the data, making it easier for companies to disclose their reports both on these organizations’ platforms.
Significant Mandates Coming to Just About All Big-Listed Firms in the EU
The company said that with ESRS mandates having a huge impact on nearly all big and listed firms in the EU, this marks another milestone toward global climate standards becoming nearer to par.
In addition, the partnership highlights EFRAG’s drive for ensuring that the information companies will provide is comparable, relevant, and useful for stakeholders such as investors, regulators, and the public.
Higher Market and Adoption Impact
The partnership with CDP as an ESRS market adoption partner speaks to wider adoption of European standards outside the EU. CDP is one of the most established platforms in Europe, and more than 90% of the companies having their stock market listings use its platform for disclosing environmental data; thus, CDP is an important platform for driving data that can be aligned to ESRS. As CDP plays a role in helping facilitate global adoption of ESRS, it may play an important role toward creating transparency and quality of data by the companies around the world.
Looking ahead, CDP and EFRAG will consider further opportunities for alignment. In 2025, CDP will publish insights on the responses ESRS-aligned, further added value to companies in terms of actionable data aligned with European climate standards.
Simplification of business compliance
Through the CDP-EFRAG collaboration, companies performing operations within several jurisdictions can get simple compliance benefits. The facts that CDP’s questionnaire is compatible with ESRS E1 means that the two organizations help companies to report more pragmatically by leveraging resources on developing climate-related initiatives.
This also stands to decrease the reporting burden of the company especially taking into consideration that it will be more companies in their incorporation of ESG into their business operations. The streamlined reporting process also enhances multi-region alignment, a strategy that is in tandem with the aims of both CDP and EFRAG towards fostering sustainable business practices.
Future
The CDP-EFRAG collaboration is one step closer to standardized and interoperable climate reporting. Both organizations are committed to environmental transparency and are working in conjunction to carry the new sustainability reporting frameworks forward in such a way that it becomes easy for companies to improve climate disclosure while making compliance manageable. Guidance for 2025 will prove instrumental for any company either entering or adapting into new European standards, which is much needed for those seeking to achieve compliance both with CDP and ESRS.
Source
Topics Based on recent announcement by CDP and EFRAG at COP29 about climate reporting standards and interoperability.