On Friday 3 February, TIC Council, on behalf of MEP Pascal Durand, hosted a breakfast at the European Parliament to discuss the implementation of the Corporate Sustainability Reporting Directive (CSRD), following the final approval for its adoption given by the European Council at the end of November 2022.
With this event, TIC Council facilitated an exchange between key stakeholders and policymakers on the opportunities and risks to the implementation of the directive.
Hanane Taidi started the discussion by congratulating the European Commission and the European Parliament for the adoption of such historical legislation as CSRD. She highlighted the role that the Testing, Inspection and Certification (TIC) sector will have in the correct implementation of the Directive, being one of the building blocks of the quality infrastructure system, together with accreditation and standards.
MEP Pascal Durand, who led the work of the European Parliament on the CSRD, outlined key challenges faced by policymakers in drafting the Directive. In particular, he explained that they tried not to increase the administrative burden of companies and that the main objective was to set harmonised standards for climate reporting across the EU, as is the case for financial reporting. However, despite these efforts, he noted that the EU had failed to open the market of non-financial reporting.
André Lacroix described the CSRD as a huge achievement for both Europe and globally. He stressed that sustainability should start at the heart of the value chain, noting that the CSRD is much more than audit of sustainability disclosures: it requires companies to put forward credible plans on how to improve their performance. In this regard, the TIC sector has a unique role in assessing the quality, safety and sustainability standards of the value chain of its clients across several industries, and TIC Council members will help local markets with the transposition of the Directive.
Thomas Dodd explained that the European Commission’s intention with the CSRD was to put sustainability reporting on equal footing as financial reporting. The main challenge remains the fact that CSRD allows but does not oblige Member States to open up the markets beyond statutory requirements: this makes it difficult to understand how many Member States will move beyond the statutory financial auditors. He concluded by supporting MEP Pascal Durand’s idea of setting sustainability standards harmonised at EU level.
Guillaume Prache stressed that retail investors would benefit from clear and consistent disclosure standards, encompassing those developed by EFRAG and the International Sustainability Standards Board (ISSB). He added that, as with the Non- Financial Reporting Directive (NFRD), the CSRD should also make a management report available to the public free of charge. His recommendation was that this report would include concise and summarised guidelines for retail investors to help investors understand how such standards for sustainability disclosures should be understood
Caroline Weber addressed the limits of the CSRD: while it reinforces the credibility of CSR data in Europe, it does not automatically lead to action. Medium-sized companies need more action and less paperwork. In her view, the most efficient solution would be to introduce a carbon tax. Finally, she pointed out some practical issues of the CSRD regarding business secrecy: competition, publication and, more importantly, the turnover of auditors in consultancies, who may pass confidential information to competitors.
Maureen Logge highlighted the role of accreditation in helping national authorities with technical knowledge and competence, followed by a presentation on the further challenges of the CSRD. Firstly, a key challenge would be to ensure a level playing field between statutory auditors and conformity assessment bodies (CABs): CABs should be accredited by the National Accreditation Bodies (NABs) before 1 January 2024. A second challenge, in her view, is to establish harmonised requirements for CABs and statutory auditors, avoiding national schemes. Finally, she highlighted the difficulty in finding competent auditors, and that competence can be granted only by accreditation
Marc Boissonnet closed the panel by addressing the issues that TIC companies face in being accredited for the CSRD. In particular, he remarked the words of MEP Pascal Durand on the failure of opening of the market of sustainability assurance services to independent assurance services providers (IASPs), despite being one of the objectives of the Directive.