Clearer Nature Disclosures: EU Aligns Rules with Global Standards

June 25, 2024 – The European Financial Reporting Advisory Group (EFRAG) and the Taskforce on Nature-related Financial Disclosures (TNFD) have collaborated to release a correspondence mapping between the suggested disclosures of TNFD and the European Sustainability Reporting Standards (ESRS), which is a noteworthy advancement for corporate sustainability reporting. The great degree of overlap between the two standards is highlighted by this mapping, which makes it easier for businesses to comply with the Corporate Sustainability Reporting Directive (CSRD). Principal Effects: 1) High Commonality: The ESRS incorporates all 14 of the TNFD's required disclosures, guaranteeing thorough alignment. 2) Strategic Alignment: The mapping makes it easier for European businesses to comply with CSRD regulations, which streamlines sustainability reporting. 3) Ongoing Collaboration: To improve disclosures about nature, EFRAG and TNFD will keep creating guidelines and resources. Promoting Nature-Related Transparency in Corporate Reporting: The publication of the correspondence mapping is a significant step forward in this regard. "Today's release of the correspondence mapping between the ESRS and the TNFD recommendations marks a significant milestone in advancing nature-related transparency in corporate reporting," stressed Patrick de Cambourg, Chair of the EFRAG SRB. The goal of this cooperation, which was formalised by a Memorandum of Understanding (MoU), is to maximise uniformity in environmental guidelines and standards. Companies covered by the CSRD benefit from the mapping, which enables them to recognise the similarities between TNFD and ESRS. Consistent Reporting Framework: Tony Goldner, TNFD Executive Director, emphasised the significance of this alignment by saying, "The assessment released today gives market participants that extra clarity." We are eager to work with the European Union in the creation and dissemination of useful guidelines going forward. Important Correspondence Mapping Features: 1)Concepts and Definitions: The emphasis of both standards is on revealing the opportunities, hazards, and impacts associated with nature, including reliance on it. 2)Materiality Approach: While TNFD accepts a number of approaches, including double materiality, ESRS mandates a double materiality principle. 3)LEAP Approach: TNFD's LEAP approach, which offers CSRD report preparers a thorough framework, is advised for materiality assessments in ESRS. The two adhere to the four disclosure pillars of the TCFD, which are Metrics and Targets, Governance, Strategy, and Risk Management. 4)Suggested Disclosures and Metrics: The ESRS incorporates all 14 TNFD disclosures, guaranteeing accurate and up-to-date data on sustainability issues pertaining to the environment. Dedicated to Openness "Many have requested us for additional guidance to ensure their reporting complies with their mandatory CSRD requirements," Goldner continued. In order to encourage transparency and sustainable development, EFRAG and TNFD will keep supporting the disclosure of information pertaining to the environment. The partnership between TNFD and EFRAG is expected to promote international efforts towards a sustainable future by giving businesses the clarity and resources they need to comply with strict sustainability reporting requirements.