EFRAG and CDP Collaborate to Accelerate ESRS Adoption Among Global Companies

EFRAG and CDP announced a cooperation agreement on 8 November 2023 to accelerate market uptake of the European Sustainability Reporting Standards adopted by the European Commission on 31 July 2023. The agreement includes alignment of CDP's disclosure platform with ESRS data points and joint capacity-building support for companies preparing to comply with CSRD requirements.

The ESRS cover five environmental areas: climate change (E1), pollution (E2), water and marine resources (E3), biodiversity and ecosystems (E4), and resource use and circular economy (E5). Starting January 2024, the standards apply to approximately 50,000 businesses, with broader application expected to include non-EU companies through value chain reporting requirements. CDP currently serves more than 23,000 disclosing companies representing two-thirds of global stock market capitalisation and nearly 90% of European market value.

The ESRS follow a double materiality approach, requiring companies to report both on how environmental changes may affect their operations and on how their activities impact people and planet. This scope goes beyond existing climate frameworks and aligns with the GRI standards and the IFRS S2 climate disclosure standard developed by the ISSB. CDP's existing data on climate, forests and water security already covers a significant proportion of ESRS environmental requirements, meaning many disclosing companies have a head start on CSRD compliance.

The cooperation will see CDP — supported by EFRAG technical expertise — offer webinars and detailed guidance materials to help companies use CDP's platform to report ESRS data points. STOXX data cited by CDP shows that companies rated A by CDP have collectively outperformed the global market by 5.8% per year on average from 2011 to 2021, suggesting a business case for robust environmental disclosure. The EU laws are expected to influence disclosure legislation in other jurisdictions, including through the SFDR framework already requiring banks and investors to disclose product-level climate and nature impacts.

Key figure — 50,000 businesses subject to ESRS from January 2024