CSRD reports – EFRAG presents first sector-specific standards

The European Financial Reporting Advisory Group (EFRAG) published draft sustainability reporting standards for the oil and gas and mining and coal sectors. These standards give an early indication of the additional reporting requirements which affected companies can refer to when preparing their sustainability reports. The European Commission has not yet adopted the reporting standards. Once adopted, the standards will be binding.

The Corporate Sustainability Reporting Directive (CSRD, Directive (EU) 2022/2464) requires certain companies to prepare annually a sustainability report as part of their management report. We reported on this requirement: Sustainability reporting under the CSRD: Changes to the size criteria for companies and European Sustainability Reporting Standards (ESRS).

The European Commission commissioned EFRAG to develop draft European reporting standards for sustainability reporting, or ESRS for short. Under the CSRD, the European Commission is required to adopt sector-specific standards. These define the additional information that companies in specific industry sectors must publish in their sustainability reports. The sector-specific ESRS are intended to define more detailed reporting disclosures for important ESG (environmental, social and governance) topics and thus make it easier to compare different companies in a sector. We reported on the sector-specific ESRS: European Parliament and Council extend ESRS deadlines for certain sectors and third-country companies – Federal Office for Economic Affairs extends reporting deadlines.

ESRS development process

The process of developing the ESRS for the oil and gas and mining and coal sectors is well underway. EFRAG is developing the sector-specific standards in two main phases. Once EFRAG has prepared a draft and reviewed it internally, it will publish it for public discussion. In the second phase, it will evaluate the feedback and amend the draft. The European Commission is then responsible for issuing the standards. The process of developing reporting standards usually takes up to 24 months. The European Commission has yet to give its final approval to the two sector-specific ESRS for oil and gas and for mining and coal.

ESRS for oil and gas

The draft ESRS for Oil and Gas is aimed at companies operating in the oil and gas industry. The reporting standard focuses on the following four areas of activity:

• Upstream: Exploration, development and production of conventional and nonconventional oil and gas deposits;
• Midstream: Transportation and storage of oil and gas;
• Downstream: Refining, marketing and operation of oil and gas facilities;
• Service: Support within the value chain through services like drilling and seismic surveys as well as the sale and rental of the necessary equipment.

For example, companies are required to disclose the production volumes of certain products (such as heavy fuel oil or LNG) in their sustainability reports, and to report on oil and gas reserves in vulnerable areas and the associated risks.

ESRS for mining and coal

The draft ESRS for mining and coal concerns companies that operate in the coal and mining industry. These cover the following activities:

• Mining: Extraction of metals and quarrying;
• Coal mining: Extraction of solid fuels and manufacture of coal products;
• Services: Supporting services such as prospecting, drainage and test drilling.

Companies have to provide information on industrial hazards, for example, and explain what measures have been taken to avoid risks and prepare for emergencies. They are also meant to report on risks associated with mineral reserves. This includes disclosures on proximity to conflict areas or protected zones. Companies are also expected to present plans for decommissioning mining sites and the associated financial implications.

Conclusion and outlook

EFRAG is currently working on further standards for an expected total of over 30 sector-specific ESRS. As developing the standards is a time-consuming process, companies will have to wait and see over the next few months and years what further specific requirements EFRAG and the European Commission will impose on their sectors.

 

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