ERU, Alm.del - 2022-23 (2. samling) - Bilag 223: Notat samt høringssvar til Kommissionens høring om kommende bæredygtighedsstandarder under CSRD

Erhvervsudvalget 2022-23 (2. samling)
ERU Alm.del Bilag 223
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Template for comments on draft ESRS Delegated Act

The draft delegated on European Sustainability Reporting Standards (ESRS) comprises: the main text of the legal act; twelve draft standards

(annex I); and a glossary of abbreviations and defined terms (annex II).

The twelve draft standards in Annex I are:

Group

Cross-cutting

Environment

Social

Governance

Number

ESRS1

ESRS2

ESRS E1

ESRS E2

ESRS E3

ESRS E4

ESRS E5

ESRS S1

ESRS S2

ESRS S3

ESRS S4

ESRS G1

Subject

General Requirements

General Disclosures

Climate

Pollution

Water and marine resources

Biodiversity and ecosystems

Resource use and circular economy

Own workforce

Workers in the value chain

Affected communities

Consumers and end users

Business conduct

Each standard is divided into numbered paragraphs. Each standard

also has an appendix A containing “application requirements” which are

numbered as AR 1, AR 2 etc. Some standards also contain additional appendices.

To facilitate analysis of comments, respondents are kindly requested to use the simple template below when sending their comments.

ERU, Alm.del - 2022-23 (2. samling) - Bilag 223: Notat samt høringssvar til Kommissionens høring om kommende bæredygtighedsstandarder under CSRD

Name of respondent/responding organisation: The Danish Government

General comments

The Danish Government would like to thank the Commission for its extensive work regarding the amendment of

EFRAG’s

draft proposal on

European Sustainability Reporting Standards. We commend the Commission for the changes made to the standards and consider these as

significant improvements with regards to proportionality and value-creation.

The Danish Government supports an ambitious approach to sustainability reporting as an effective tool to ensure transparency and

comparability of undertakings' sustainability and thereby support the transition to a sustainable economy.

As pointed out by Minister Bødskov during the Competitiveness Council meeting in May 2023, the Danish Government finds in necessary

to continue working with supportive measures that can help undertakings to digitize, standardize and automate their reporting, for example

by structuring data in standardized data formats and ensuring a European open data exchange infrastructure. Please find attached a technical

paper with more elaborate ideas and proposals on how to move forward on this. We hope these can serve as basis for further discussion

between the Commission and other Member States.

Furthermore, Denmark proposes that reporting requirements are compatible with the needs for information from the financial market

participants in relation to the reporting requirements under other EU financial legislation, e.g., Sustainable Finance Disclosure Regulation

(SFDR).

Specific comments on the main text of the draft delegated act

Regarding the modifications made to the role of the materiality assessment, we emphasize the importance that the amendments should be in

alignment with the information required from the financial market participants.

The Danish Government supports the approach to the materiality assessment proposed by the Commission in the revised standards, as

minimizing irrelevant reporting obligations promotes the aim of balanced and reliable reporting. However, we would like to highlight a

potential challenge arising from the proposed amendments to the role of the materiality assessment process.

ERU, Alm.del - 2022-23 (2. samling) - Bilag 223: Notat samt høringssvar til Kommissionens høring om kommende bæredygtighedsstandarder under CSRD

As opposed to the materiality assessment following

EFRAG’s draft proposal

on the standards, according to which all the reporting

undertakings were obliged to disclose the negative impact of their activities on approximately 45 principle adverse impact indicators (PAI-

indicators), the revised approach to the materiality assessment may cause significant challenges for the financial market participants to fulfil

their obligations with respect to the Sustainable Finance Disclosure Regulation (SFDR).

Financial market participants are required to disclose certain PAI-indicators as well as to include aggregated information, in relation to all

PAI-indicators, on all undertakings in the portfolio of a financial product and therefore, the financial market participants may face challenges

when assessing their sustainability performance under the SFDR, if needed information from an undertaking reporting under CSRD may be

missing due to the information being assessed as not material by the reporting undertaking.

Thus, the proposed role of the materiality assessment process may reduce the data quality and comprehensiveness of the sustainability

reporting under SFDR. In this regard, it may be considered whether reintroducing PAI-indicators as mandatory disclosure requirements for

undertakings reporting under CSRD.

The Danish Government notices that ESRS includes references to external standards, protocols, guidelines etc. that are part of the legal

binding requirements for undertakings in the delegated act. This includes e.g., the GHG protocol, ISO 14064-1:2018 and the UN Guiding

Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. Since these external standards etc. form

part of the legal binding requirements for undertakings in the delegated act, the Danish Government expects the Commission to provide for

translations of such external standards and guidelines to ensure that undertakings can familiarize themselves with the rules in their own

language.

We are pleased that the Commission decided to include phase-ins for certain reporting requirements. However, we request a clarification

regarding the threshold of 750 employees. It is not clear whether the undertaking is to make the assessment of the number of employees at

the start of a new financial year or on the balance sheet date. If the assessment is to be made on the balance sheet date, this could be

problematic for the undertakings that exceed the threshold during the financial year, as they would be required to report on sustainability

information for the part of the financial year when they have not been above the threshold. This would pose significant challenges for these

undertakings regarding data collection on those sustainability matters.

Additionally, the Danish Government would like to highlight that it is of great importance that the standards do not entail high administrative

burdens on the reporting undertakings. The Commission could e.g. consider to clarify that the Disclosure Requirement GOV–4 -

Statement

on due diligence

in ESRS 2, paragraph 33, applies

to all the standards in general: “This disclosure requirement does not

oblige any specific

behavioral requirements with regard to due diligence

actions

and does not extend or modify the role of

administrative, management and

ERU, Alm.del - 2022-23 (2. samling) - Bilag 223: Notat samt høringssvar til Kommissionens høring om kommende bæredygtighedsstandarder under CSRD

supervisory bodies

as mandated by other legislation or regulation”.

This would help to clarify that e.g. “Disclosure Requirement SBM-2 –

Interests and views of stakeholders” means that stakeholders have the right to define a “undertaking’s strategy and business model(s)”.

In addition, some disclosure requirements have a widened scope compared to CSRD. For example, Disclosure Requirement GOV–3

–

Integration of sustainability-related performance in incentive schemes

in ESRS 2, applies to both listed and non-listed undertakings, whereas

the requirements in the remuneration policy in Shareholder Rights Directive II only applies to listed companies. As the mandate in the CSRD

only related

to “information about the

existence

of incentive schemes”,

this disclosure requirement should not introduce new requirements

for undertakings that are not within the scope the Shareholder Rights Directive II.

Finally, the Danish Government is pleased with the amendments made regarding the phase-ins of certain reporting requirements, and overall

welcomes

the Commission’s

ESRS draft proposal.

Specific comments on Annex I

Standard

Paragraph or AR

number or

appendix

AR 44(b) and AR

47(e)

Comment

ESRS E1

AR 51

Paragraph 35(b)

ESRS E1

Paragraph 57(b)

The term “Suitable emission factors” is up for interpretation and creates questions of how a suitable emission

factor is defined. It could be considered adding a small clarification stating that the chosen emission factors should

seek to improve data quality and that engaging with suppliers to retrieve high quality supplier specific emissions

will provide the most suitable emission factors. CSRD should seek to avoid ambiguity and unclear wording to

minimize the burdens for the undertakings.

It could be considered to highlight the GHG protocols 15 categories as examples as well as the ISO-standard.

The sentence: “The undertaking shall specify, in case of combined

GHG emission reduction targets,

which GHG

emission Scopes (1, 2 and/or 3) are covered by the target, the share related to each respective GHG emission

Scope and which GHGs are covered.” indicates that scope 3 does not have to be included in the reduction target.

We suggest a clarification by deleting “or”

or clarifying that reduction targets could be set for example scope 1 + 2

and individually for scope 3.

The phrase

“intends to finance” has been added to this paragraph

after the revision of the standards, which opens

for the opportunity for undertakings to receive good will for intentions, and not actions.

ERU, Alm.del - 2022-23 (2. samling) - Bilag 223: Notat samt høringssvar til Kommissionens høring om kommende bæredygtighedsstandarder under CSRD

ESRS E1

Paragraph 58(b)

AR 5

ESRS E1

ESRS E2

AR 47 (c)

Paragraph 32-35

and AR 33-35

Paragraph 26

(E2) and

paragraph 38

(E5)

ESRS E2 and

In connection to the comment related to paragraph 57(b), it could be considered to reintroduce the phrase

”Cancelled in the reporting period” and remove the phrase “intends to purchase”.

AR 5 has been deleted in the revised standards. Keeping AR 5 from the previous version of the standards could

ensure transparency about investments in the oil and gas industry, however, if AR 5 has intentionally been deleted,

the numbers should be corrected.

There is mistake in reference to the ISO-Standard: EN ISO 14064-1:2018

Regarding substances of concern or substances of very high concern, there is no threshold regarding when the

substances are not considered material. There should be clear guidance on how the undertakings are to make this

assessment. Such guidance has been requested by several stakeholders.

Paragraph 26 (E2) concerns the disclosure of pollutants emitted through the undertaking’s own operations.

Paragraph 38 (E5) includes specifications regarding the disclosure of the composition of waste. However, we

cannot see any disclosure requirement which directly requires the undertakings to disclose the composition of the

waste. We suggest this is clarified.

Specific comments on Annex II

Defined term

Comment