MEPs sign letter urging EFRAG for transparency & balanced representation of stakeholders
"MEP LETTER TO EFRAG – STAKEHOLDER REPRESENTATION", 15 July 2021
Dear Chair,
Dear Mr Gauzès,
Building on EFRAG’s role and responsibilities in the field of financial accounting, the European Commission requested EFRAG through the Action Plan on Financing Sustainable Growth to explore innovation and best practice on corporate sustainability reporting.
Since 2018, the work implemented by the European Lab Steering Group and its various projects on climate disclosures or reporting on business models and risks has provided invaluable insights to EU institutions, companies, investors and the broader community of stakeholders. Similarly, upon request of Valdis Dombrovskis, Executive Vice-President of the EU Commission, a Project Task Force (PTF) on Non-Financial Reporting Standards was set up with the objective of providing key recommendations for the development of EU sustainability standards.
Recognising the value of the PTF leadership and expertise, EU Commissioner Mairead McGuinness invited EFRAG to reactivate the group and continue the work in order to provide advice on the first set of standards to be adopted via delegated acts by October 2022. This request has been included in the Corporate Sustainability Reporting Directive (CSRD) presented by the EU Commission this year.
The mandate provided in the letter by EU Commissioner Mairead McGuinness clearly indicates that both the interim process to be carried out this year as well as the changes that EFRAG must undertake in its governance and structure to establish a formal process to develop sustainability standards must be implemented with transparency and due process. The letter also refers to the Commission CSRD proposal, which outlines the need for public oversight and expertise of relevant stakeholders.
Following the recent news coming from EFRAG, we would like to stress the importance of due process, balanced stakeholder representation and transparency around the PTF work, in order to ensure adequate public and democratic oversight.
In our view, the following principles must be guaranteed and respected:
- Balanced representation of stakeholders: Relevant expertise must be secured by representatives from the corporate, investor and asset management and accountancy sector as well as academia, reporting initiatives, trade unions and NGOs in a proportional manner. Special attention must be given to prevent potential conflict of interests and implement needed measures to avoid overrepresentation of specific national or group interests.
- Provide public funding to enable participation of civil society representatives: Participation of NGOs and trade unions society must not be subject to the requirement of providing funding to EFRAG. The role of these organisations is to safeguard the public interest and provide expertise, especially on impact materiality.
- Role of the EU institutions: The current informal process must respect the fact that in the coming months the European Parliament and Member States will discuss the key principles and safeguards needed in the CSRD to guarantee a fair, transparent and diligent process to set European sustainability reporting standards. In this regard, DG Fisma should oversee the implementation of the technical work and approve selection of experts and contributors.
- Transparent process: EFRAG should ensure information on the people and organisations involved in the PTF as well as engagements set with external stakeholders is disclosed in a timely manner. The European Parliament and other EU institutions must be able to oversee the process and implementation of this work in EFRAG...