EFRAG: Sector-specific ESRS development process explained

The role of the European Financial Reporting Advisory Group (EFRAG)

EFRAG is mandated by the European Commission (EC) to provide technical advice to CSRD. Following the publication of the cross-sectoral ESRS reporting standards in December 2023, EFRAG has the mandate to develop an additional series of sector-specific ESRS.

For this reason, EFRAG began developing the first set of draft standards in September 2022, including the SEC1 sector classification and four sector standards. In March 2023, the European Commission asked EFRAG to prioritize work on the cross-sectoral ESRS. Since 2024, work on sector-specific standards has once again been given more importance.

When will sector-specific European Sustainability Reporting Standards come into force?

The sectoral ESRS were originally intended to be published by mid-2024 and for all Companies affected by CSRD to apply that generate at least 10% of their turnover in the respective sector.

In February 2024, the European Commission decided to postpone publication until June 2026. This should give companies more time to focus on implementing the first ESRS series and to enable the development of sector-specific standards and standards for specific companies from third countries.

Sector-specific standards development process

The development process comprises two main stages, the “Exposure Draft Stage” and the “Final Draft Stage.” Both stages are in turn divided into different phases, which are explained below.

The “Exposure Draft Stage”

The process for developing industry standards is divided into four phases.

1. Research: This creates the basis for the draft by identifying and prioritizing the most important sustainability issues and identifying current disclosure practices.
2. Drafting: Preparation of a draft document based on collected information and input from sector-specific working groups. Public technical discussions between EFRAG SR TEG (Sustainability Reporting Technical Expert Group) and EFRAG SRB (Susainability Reporting Board) point the way forward for the design phase and potential draft meetings.
3. Validation: The work done so far is validated in public discussions held between the SRB  EFRAG SR TEG‍
4. Approval: The draft standards for public consultation are approved by SR TEG and EFRAG SRB

The “Final Draft Stage”

Once the design has been approved, the final design phase, which consists of five phases, begins. The working groups convened by EFRAG are also consulted here in order to involve a wide range of external stakeholders, collect input and thus advance work on the development of sector-specific reporting standards.

1. Public consultation: The draft is submitted for public consultation in accordance with the EFRAG process. Here, feedback on the preliminary draft is collected through workshops and general exchange.
2. Analysis: The EFRAG secretariat analyses the feedback from the public consultation and summarizes the key points.
3. Redeliberation: The main points from the public consultation are discussed by EFRAG SR TEG and SRB. ESRS are developed from this.
4. Approval: The sector-specific ESRS are approved by EFRAG SR TEG and SRB.
5. Finalization: Revision of approved documents before publication to prepare you for technical advice from the European Commission.

According to EFRAG, it can take more than 18 months to complete a draft standard. The decision as to which standards should be developed falls within the remit of EFRAG SRB and is determined by a prioritization process. Among other things, this process takes into account sectors with major ecological impacts.

Sector-specific reporting standards — status quo

Even though support is currently being provided for the implementation of cross-sectoral ESRS, priority will be given to continuing the development of sector-specific draft standards at secretariat level and implemented with the help of external resources. This includes involving expertise and working with experts in sector-specific working groups. Although these standards are not currently being discussed by SR TEG and SRB, the time frame for the standards and the current development phases are listed below.

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