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Sustainability now: EU Omnibus in motion – June 2025 update · PwC's accounting podcast

• 0:00
  SPEAKER_00: Thought Leadership from PWC's National Office.
• 0:07
  SPEAKER_03: Hello, I'm Heather Horn, PWC's U.S.
• 0:10
  SPEAKER_03: Sustainability Technical Leader, and I'd like to welcome you back to PWC's Accounting Podcast.
• 0:15
  SPEAKER_03: In today's episode, we're back with the latest updates on the European Commission's omnibus package.
• 0:21
  SPEAKER_03: Today we'll bring you the latest developments and some thoughts on what may be coming next.
• 0:26
  SPEAKER_03: To help walk through these updates, I'm happy to be joined once again by Diana Stoltsfest, National Office Partner, co-chair of our Global Environmental Technical Working Group, and a familiar voice on our podcast.
• 0:37
  SPEAKER_03: Welcome back, Diana.
• 0:38
  SPEAKER_03: Thank you.
• 0:39
  SPEAKER_03: So a couple quick notes though before we get started.
• 0:41
  SPEAKER_03: If you're listening and you'd like to watch along with us, please check out the show notes for a link to the video.
• 0:47
  SPEAKER_03: In addition, for further background on these proposals, I also encourage you to check out our past episodes, which were released in March and May.
• 0:55
  SPEAKER_03: Links to these episodes may also be found in the show notes.
• 0:58
  SPEAKER_03: All right, with that, we can get started.
• 1:01
  SPEAKER_03: So, Diana, I referenced those earlier podcasts.
• 1:04
  SPEAKER_03: And so we're not going to go through all the backstory of what happened and what the developments have been so far, but maybe we could at least give the thumbnail sketch so people can reorient themselves to where we are.
• 1:15
  SPEAKER_03: And maybe I'll I'll put a bookmark and say that we're recording this on June 10th.
• 1:20
  SPEAKER_03: So things could change a lot between now and potentially when people are watching.
• 1:24
  SPEAKER_03: But please go ahead.
• 1:25
  SPEAKER_01: I think about it in three pieces when I think about the omnibus package.
• 1:29
  SPEAKER_01: One is the stop the clock proposal.
• 1:30
  SPEAKER_01: That was approved on April 3rd, and that delays reporting for wave two and wave three reporters by two years.
• 1:37
  SPEAKER_01: And so that's done.
• 1:39
  SPEAKER_01: Then we have the content proposal.
• 1:40
  SPEAKER_01: The content proposal is still working its way through the co-legislative process, and that's scheduled to be approved in October.
• 1:47
  SPEAKER_01: And what the content proposal contains is really the changes to CSRD and ESRS, which is the European Sustainability Reporting Standards.
• 1:57
  SPEAKER_01: And then the last piece was the amendments to the EU taxonomy.
• 2:01
  SPEAKER_01: Those are supposed to be approved in Q2.
• 2:03
  SPEAKER_01: So we hope maybe sometime later this month.
• 2:06
  SPEAKER_03: All right.
• 2:06
  SPEAKER_03: And then Diana, one maybe point on stop the clock.
• 2:09
  SPEAKER_03: So you said it's done.
• 2:11
  SPEAKER_03: And that is true because it's been adopted, but it does need to be transposed in the member states that have transposed CSRD.
• 2:17
  SPEAKER_03: And they have until the end of the year to do that.
• 2:20
  SPEAKER_03: That's correct.
• 2:21
  SPEAKER_03: And I think probably we are presuming that it will be transposed.
• 2:25
  SPEAKER_03: And so that's why people are generally thinking of it as done.
• 2:28
  SPEAKER_03: But it still is important to keep an eye on that timeline.
• 2:32
  SPEAKER_03: Good point.
• 2:32
  SPEAKER_03: All right.
• 2:33
  SPEAKER_03: Thank you.
• 2:34
  SPEAKER_03: So, as I said, sort of as a preface to this whole podcast, we're going to focus today on developments and reactions to the content proposal and dig a little deeper into the changes to ESRS because we've actually started to see some feedback from FREG's outreach process.
• 2:50
  SPEAKER_03: But before we talk about ESRS, let's start with the content proposal.
• 2:54
  SPEAKER_03: What legislative activity have we seen since our last update?
• 2:58
  SPEAKER_01: Yeah, so I think there's been a lot of discussions that's going on in the European Parliament, and we're starting to see a lot of different kinds of opinions coming out and maybe focus on two topics really.
• 3:10
  SPEAKER_01: The first one is around assurance.
• 3:12
  SPEAKER_01: So as we'd seen in the content proposal, it proposed to remove reasonable assurance altogether.
• 3:18
  SPEAKER_01: We're seeing that some of the political parties want to bring reasonable assurance back.
• 3:23
  SPEAKER_01: So maybe a reasonable assurance in 2030.
• 3:26
  SPEAKER_01: So still, so still some discussions around whether it will stay at limited assurance or whether you know it will move to reasonable assurance.
• 3:33
  SPEAKER_01: And one of the other pieces related to assurance as well is there have been some political parties that have suggested that the statutory auditor should not be allowed to provide the assurance over the sustainability and that they want to have it instead be a firm, a smaller firm, so a firm with less than 10% market share.
• 3:53
  SPEAKER_01: I think some of the questions there is around, you know, are there enough of those kind of more what I would call boutique-sized firms that would be able to provide assurance given the number of companies that would need assurance in the European market?
• 4:05
  SPEAKER_03: And I think also, Diana, what's interesting, just reacting to that, is because of the connectivity to the financial statements, and we know there are some even data points that are relying on the financial statements.
• 4:16
  SPEAKER_03: It'll be interesting to see if that uh precedes how you know that will work.
• 4:21
  SPEAKER_03: So potentially more to come.
• 4:22
  SPEAKER_01: Yeah, I think that's a that's a good point to follow as well.
• 4:25
  SPEAKER_01: Yeah.
• 4:25
  SPEAKER_01: And then maybe one of the other things that we've seen a lot of discussion around too is around the number of employees.
• 4:33
  SPEAKER_01: So that was one of the proposed changes to CSRD was to move from the 250 employees, and and this is maybe taking a step back.
• 4:40
  SPEAKER_01: This is, you know, companies that would be in scope of reporting under the CSRD in accordance with the European sustainability reporting standards.
• 4:48
  SPEAKER_01: In this, in the omnibus content proposal, they had proposed to move the number of employees from a 250 employee threshold to companies with a thousand employees or more.
• 4:57
  SPEAKER_01: Um, you still have the revenue and the balance sheet considerations as well, but the main change was around this number of employees.
• 5:04
  SPEAKER_01: So we've seen some people that have said they think that moving to a thousand employees is is too high of a threshold.
• 5:10
  SPEAKER_01: It should be 500 employees.
• 5:12
  SPEAKER_01: And then we've seen obviously people going the other way or different political parties going the other way saying that's not high enough.
• 5:18
  SPEAKER_01: It should be moved to a threshold of 3,000 employees.
• 5:21
  SPEAKER_01: So I think some discussion is still there to see where it will land.
• 5:25
  SPEAKER_01: So that's kind of what we're seeing in the European Parliament.
• 5:29
  SPEAKER_01: And then as we know, it's a co-legislative process.
• 5:32
  SPEAKER_01: So the European Council also has to uh, you know, weigh in and approve, approve whatever the final proposal is as well.
• 5:39
  SPEAKER_01: And so the main things that we've seen there is that we have seen them um, well, there was a leaked draft of a position paper.
• 5:47
  SPEAKER_01: And what we've seen is that they would endorse the thousand employee threshold.
• 5:52
  SPEAKER_01: Um and then I think one of the things that's a little bit interesting in the leak proposal as well is that they would propose to allow the European Commission to adopt what they call sector-specific guidelines.
• 6:04
  SPEAKER_01: So, you know, one of the pieces of the content proposal was to eliminate the development of sector-specific standards.
• 6:13
  SPEAKER_01: Um, and so it'll be interesting to see what's this difference between these kind of guidelines and standards.
• 6:19
  SPEAKER_01: Those are the two of the big pieces.
• 6:20
  SPEAKER_01: And then maybe one last thing to touch on is there's been a lot of discussion around what standards should companies use that are below this threshold.
• 6:30
  SPEAKER_01: What we've seen is kind of movement towards what we've seen is the voluntary sustainability standards for small and medium-sized entities, and that seems to remain.
• 6:39
  SPEAKER_01: And there is a draft of those that has been approved, I believe, all the way through the European Commission.
• 6:44
  SPEAKER_03: Yeah, and again, I think that will be interesting to see, and probably a topic that we should cover in another podcast.
• 6:50
  SPEAKER_03: But one thing I jotted down that's interesting on these sector-specific guidelines, is I think when people were reacting to the original omnibus, probably the one place that at least, you know, we saw the most discussion was is it really helpful to get rid of these sector-specific standards?
• 7:05
  SPEAKER_03: Because I think in some cases, companies were actually thinking this could help reduce the burden by making it more clear what was required.
• 7:13
  SPEAKER_03: I think, particularly financial services, but obviously there's a lot of other specialized industries.
• 7:18
  SPEAKER_03: So maybe this sector-specific guidelines is sort of bridging that gap because I do think there are a lot of companies that you know would appreciate to see more what would be expected.
• 7:29
  SPEAKER_03: And then maybe that could replace some entity specific as well.
• 7:32
  SPEAKER_03: So maybe more to come on that.
• 7:34
  SPEAKER_03: Yeah, I think definitely.
• 7:35
  SPEAKER_01: I think that's a great point.
• 7:36
  SPEAKER_03: Um, so then just thinking through, so we've seen a lot of leaks here that you're talking about and just a lot of discussion.
• 7:44
  SPEAKER_03: Obviously, that's also public.
• 7:46
  SPEAKER_03: Have we started to see any reaction from the business community in Europe to some of these proposed changes?
• 7:52
  SPEAKER_01: Yeah, so there was a recent survey that was done by a group called We Are Europe, which is an independent and representative voice for professionals in Europe.
• 8:01
  SPEAKER_01: They partnered with one of the business schools, um, HEC Paris, and did a real survey to get what was the response to the omnibus proposal and really CSRD itself.
• 8:11
  SPEAKER_01: I think one of the things that there was a few things that were interesting to me.
• 8:15
  SPEAKER_01: One was that overall, like the support for the CSRD in its current form was actually pretty high.
• 8:21
  SPEAKER_01: I think it was like over 80% or right around 80%, which um was higher than I had it expected.
• 8:29
  SPEAKER_01: And actually, that there's more of a negative reaction towards the omnibus proposal.
• 8:34
  SPEAKER_01: Um, and even around the threshold, around uh the businesses feeling like the 1,000 employee threshold isn't the right threshold, and that even like a 500 employee threshold, so a lower threshold is more preferable.
• 8:48
  SPEAKER_01: And that's even among companies that have employees in that 500 to 1,000 company range.
• 8:55
  SPEAKER_01: And so I don't know if you know, some of this could be driven by, you know, continuing changes in regulations, obviously challenging for businesses to really understand, you know, what is their longer-term strategy and react to, you know, upcoming regulations.
• 9:08
  SPEAKER_01: So I don't know if that's maybe some of what's driving that.
• 9:11
  SPEAKER_01: I think one of the other points that's interesting is there does seem to be differences in kind of the regional perspective.
• 9:18
  SPEAKER_01: So the Eastern European respondents showed high levels of concern and challenge around CSRD, whereas like the Nordic and Western countries, like France, had strong, stronger support overall for CSRD.
• 9:30
  SPEAKER_01: So interesting to see kind of those different dynamics depending on on the country and kind of regional.
• 9:36
  SPEAKER_03: Yeah, and that's also when I was listening to you talk about this, this is a bit of a different narrative than what we're hearing otherwise.
• 9:43
  SPEAKER_03: And so, you know, you also do wonder does it depend who they're serving and you know, how much bias there might be in this data set?
• 9:51
  SPEAKER_03: We've been learning a lot about bias with AI.
• 9:53
  SPEAKER_03: So this is kind of top of mind.
• 9:55
  SPEAKER_03: But again, it is another data point.
• 9:57
  SPEAKER_03: And I do think your point that for a lot of companies have already adopted more change is actually potentially more work.
• 10:06
  SPEAKER_03: And so, you know, from that point of view, some static rules that they can just get used to perhaps would be more helpful.
• 10:13
  SPEAKER_03: All right, so let me move on to another leak.
• 10:16
  SPEAKER_03: So this was a leak of a pro of a proposal that showed listed over 120 delegated acts or a few to be delegated acts that would be proposed to be deleted.
• 10:27
  SPEAKER_03: And some interesting items on this list.
• 10:30
  SPEAKER_03: So could you just give us a few highlights?
• 10:32
  SPEAKER_03: Yeah, maybe I'll just highlight a couple.
• 10:33
  SPEAKER_03: I won't read 120 to that that would take our whole podcast.
• 10:37
  SPEAKER_03: Yes.
• 10:38
  SPEAKER_01: But I think a few that people were wondering, what does this really mean?
• 10:42
  SPEAKER_01: Is there was the delegated act on the European sustainability reporting standards for certain third country undertakings, um, the standards on limited assurance and reasonable assurance, and then again, sector-specific um European sustainability reporting standards, the sustainability reporting standards for small.
• 11:04
  SPEAKER_01: Oh, LSME.
• 11:05
  SPEAKER_01: LSME, yes.
• 11:06
  SPEAKER_01: Um, sorry about that.
• 11:08
  SPEAKER_01: And then um, so I think, and then again, the general criteria for equivalence for third country sustainability reporting.
• 11:15
  SPEAKER_01: So I think a lot of questions like does this mean that there's gonna be changes to the reporting requirements for for third country undertakings?
• 11:24
  SPEAKER_01: Um, or, you know, is reasonable assurance and limited assurance going to go away altogether?
• 11:28
  SPEAKER_01: I think what we've been hearing is that not necessarily that some of this just might be cleanup because some of these regulations, at least my understanding of it, is there's kind of this tier one, kind of what I would think of as the main regulations.
• 11:41
  SPEAKER_01: And then some of these are these tier two, which are maybe supporting regulations that provide additional clarity or additional guidance around the tier one.
• 11:50
  SPEAKER_01: So the main requirement may not be changing.
• 11:52
  SPEAKER_01: It might be some of the details.
• 11:53
  SPEAKER_01: But I don't know, Heather, you know, if you had some other perspective on this as well.
• 11:57
  SPEAKER_03: Well, I did think it was interesting, and you can see from these ones you picked out, some are very obvious why they were on there because we saw in the omnibus bus proposal not to adopt the standards for limited and reasonable assurance, also not to adopt sector specific, the you know, the LSME.
• 12:14
  SPEAKER_03: The third-party undertaking is probably was the one that jumped out at me the most because it's it's one that people are very interested in.
• 12:21
  SPEAKER_03: And I know inquiring of our uh EU colleagues, you know, what do they think?
• 12:26
  SPEAKER_03: And I think it's similar to what you are saying, is that this was sort of a cleanup.
• 12:31
  SPEAKER_03: They may not have been directly targeted in terms of them being on that list.
• 12:35
  SPEAKER_03: And so definitely if you are a third country undertaking, listening to this podcast, so basically non-EU headquartered company, I would not put any great stock in the fact that those two, the equivalents as well as the um ESRS for third party or third country, I would not put any stock into the fact they're on there and continue to proceed uh with you know the 2028 adoption with reporting in 2029.
• 13:01
  SPEAKER_03: I think that's the advice that you are giving as well.
• 13:03
  SPEAKER_03: Yeah.
• 13:04
  SPEAKER_03: One thing before we turn our attention to ESRS that you and I have chatted about a bit, Diana, is and I I think people who are listening carefully will have also noticed, we are talking a lot about leaked information.
• 13:16
  SPEAKER_03: And again, obviously we're in the US, we have our own leaks and otherwise with the news.
• 13:22
  SPEAKER_03: But it does seem like if we were talking about accounting standards in the US, I'm not sure leaks would be quite so prevalent.
• 13:29
  SPEAKER_03: And so do we have any sense of why there's so much information that becomes public?
• 13:35
  SPEAKER_01: Or I mean, I think some of what we have heard is that um some of this is that they're leaking documents ahead of making decisions to kind of get that public reaction, to get reaction from different stakeholders within the environment to understand are they going the right way?
• 13:51
  SPEAKER_01: Are some of these proposals going to be supported?
• 13:53
  SPEAKER_01: What is the reaction so that they can kind of get some early preview maybe of the reaction?
• 13:58
  SPEAKER_01: I think as we've talked about a lot, the timelines are so tight for them to get things done.
• 14:03
  SPEAKER_01: A lot of times there isn't a lot of time that's built in at least to the current timeline for public comment or putting things out.
• 14:11
  SPEAKER_01: Um, so I think maybe, at least my my view would be that maybe some of that is to try to get that early reaction to bake that in since there won't be as much time available for public comment.
• 14:20
  SPEAKER_03: Yeah, and I definitely think if you are a viewer slash listener and very interested, there are a few accounts on LinkedIn that you can probably find where you can find a lot of these documents.
• 14:31
  SPEAKER_03: And so, you know, it is out there for people to look at, or obviously we will keep giving our updates here.
• 14:37
  SPEAKER_03: So, Dana, let's turn to ESRS and specifically the proposed changes in accordance with the omnibus.
• 14:44
  SPEAKER_03: And last time we were on, you talked about FREG's work plan.
• 14:47
  SPEAKER_03: And then today we're gonna talk about some of the feedback FREG received as part of the first phase.
• 14:52
  SPEAKER_03: Before we get to the feedback though, can you just remind us of the timeline from here?
• 14:57
  SPEAKER_03: Again, we're at June 10th right now, what we expect to see.
• 15:00
  SPEAKER_01: Yeah, so I think the the next big milestone I would say, well, maybe a couple.
• 15:05
  SPEAKER_01: One is that our understanding is that towards the end of June, there will be a public draft that's again, it's not going out for public comment, but that will be shared publicly with like an early draft of what the changes will be to the European sustainability reporting standards.
• 15:23
  SPEAKER_01: Then a draft is supposed to be released for public comment at the end of July, then with a 30-day comment period throughout most of August.
• 15:32
  SPEAKER_01: And then with the standards then being updated, and then with what's called technical advice or revised set of the European Sustainability Reporting Standards or ESRS being delivered to the European Commission by the end of October.
• 15:47
  SPEAKER_01: Maybe a couple quick points on that.
• 15:50
  SPEAKER_01: One is as we've talked about, um, as with the first draft of the ESRS, the European Commission can still make changes to those draft ESRS that are provided by FRAG.
• 16:01
  SPEAKER_01: And then the second point is as we just talked about, the content proposal, the content proposal has a lot of the types of simplification or the types of changes that the European Parliament and European Council would like to see in the ESRS.
• 16:15
  SPEAKER_01: And as we talked about, I think on our last podcast, it's kind of interesting because the timeline is similar for both of them in that the revised ESRS is the end of October, and that the content proposal is supposed to be approved by the Parliament and the Council in mid-October.
• 16:30
  SPEAKER_01: So it's it's interesting that they're kind of moving in parallel given how tied they are to each other.
• 16:35
  SPEAKER_03: Yeah, and I do think again, for companies potentially impacted by these standards, definitely you need to pay attention because this will move quickly.
• 16:43
  SPEAKER_03: I know we're already planning to meet in August to work with our EU and global colleagues on PwC's letter.
• 16:49
  SPEAKER_03: But again, you know, I think one of the things we saw with this first phase of reach out from F-REG was the level of comments was quite high.
• 16:58
  SPEAKER_03: And so I'll just rewind for a moment and remind our listeners that you talked about last time that the first phase of the F-Freg work plan was to gather feedback and they had meetings and also did this questionnaire.
• 17:10
  SPEAKER_03: And they met May 21st to talk about the results of the questionnaire.
• 17:13
  SPEAKER_03: So, what can you share with us on that?
• 17:15
  SPEAKER_01: Yeah, and maybe just to highlight some of the um the point around the number, the amount of feedback that they got.
• 17:21
  SPEAKER_01: So there were over 824 respondents representing from 35 different countries, covering a really broad range of stakeholders, you know, as we've talked about, investors, auditors, academia, you know, non-governmental organization, you know, the whole, the whole kind of gamut of what you would expect.
• 17:39
  SPEAKER_01: And so what they did was they broke down the findings among the cross-cutting standards and then the topical standards, so the environmental and social and governance standards.
• 17:50
  SPEAKER_03: And from a feedback point of view, then what are some of the ones that you would highlight?
• 17:55
  SPEAKER_01: Not unexpected.
• 17:57
  SPEAKER_01: I think we saw, you know, comments around there being too many disclosure requirements, too many data points.
• 18:03
  SPEAKER_01: Again, that um there was a lot of qualitative information that's being requested and that there should be more of a focus on quantitative information.
• 18:11
  SPEAKER_01: The reports are very long.
• 18:13
  SPEAKER_01: I think that we've seen, you know, some of these reports two, 300 pages.
• 18:16
  SPEAKER_01: So, you know, that makes it hard sometimes to identify what really is the material information in the reports.
• 18:24
  SPEAKER_01: Then I think some, you know, still lack of clarity around, you know, the distinction between own operations and the value chain and kind of feeding into that, this operational control concept is challenging.
• 18:38
  SPEAKER_01: And then, you know, duplication between the cross-cutting standards and the topical standards, really the complexity of the architecture of the standards overall.
• 18:49
  SPEAKER_01: And then just one last one, because I think it's so important is interoperability, you know, between the ESRS and especially between the um, you know, ISSB standards.
• 19:00
  SPEAKER_03: Yeah, and I was just reflecting while you're reading through that list that if we we've talked before on the podcast about PwC's letter and that we did highlight sort of a top 10, although I think in our letter that might have gotten condensed to more like five or six key themes in terms of changes we thought, and many of those them are highlighted in that list.
• 19:19
  SPEAKER_03: And so it seems like the the feedback is fairly consistent because I think I mentioned even on our last episode that when we met with the FREG, they were also thinking some of those same key themes.
• 19:31
  SPEAKER_03: So it'll be interesting to see when we see this draft later this month, how those get translated and how much change, you know, we really can expect to see.
• 19:39
  SPEAKER_03: Yes, yeah.
• 19:40
  SPEAKER_03: So on that, then that was again sort of overarching and cross-cutting issues.
• 19:45
  SPEAKER_03: Anything specific you'd highlight then on the topical standards?
• 19:48
  SPEAKER_03: I know we had a few, but what else?
• 19:50
  SPEAKER_03: What else did you see?
• 19:52
  SPEAKER_01: I think um kind of similar to the theme that we had on E1 or the climate was around GHG and a lot of the GHG reporting, specifically, like the interaction between how you think about what's required under the GHG protocol, which many companies are using, you know, within the voluntary environment, or you know, under ISSB, very similar to the GHG protocol.
• 20:13
  SPEAKER_01: And some of the, you know, there's a lot of differences that are required under ESRS, which make it challenging.
• 20:19
  SPEAKER_01: And so I think that was high definitely highlighted for climate.
• 20:23
  SPEAKER_01: I think under the other e-topics, which I think is also kind of similar with some of the social topics, is just a lack of methodology for some of these kind of newer emerging areas.
• 20:34
  SPEAKER_01: And then a lot of overlap, I think people are seeing between, you know, especially when you get outside of between these different, like, you know, there's the water, but then you also have resource use, the interaction between those, and you have pollution, pollution impacts, you know, water.
• 20:50
  SPEAKER_01: So there's a lot of interaction between these different standards.
• 20:52
  SPEAKER_01: And so understanding, well, where am I supposed to report some of these different things that are really all intertwined together?
• 20:58
  SPEAKER_01: So I think that continues to be a challenge.
• 21:00
  SPEAKER_01: And then, you know, maybe uh a couple things on the social standard is really around some of these key definitions.
• 21:07
  SPEAKER_01: We've heard this a lot around like human rights and how that's defined, and then also, you know, under severity, um, that taking precedence over likelihood when you're thinking about human rights impacts.
• 21:19
  SPEAKER_01: And so, you know, how are people defining that?
• 21:22
  SPEAKER_01: Um, and then alignment with other EU regulations.
• 21:25
  SPEAKER_01: There's some where you have very similar data requirements under the social standards, but they're different in the calculations and some of the words that are used.
• 21:33
  SPEAKER_01: And so that creates a lot of challenges for companies that are having to report under these different regulations.
• 21:39
  SPEAKER_03: Yeah, I mean, I definitely think that's a place where you could make small changes that would have a very big impact.
• 21:45
  SPEAKER_03: Final topic governance, anything you'd highlight there?
• 21:48
  SPEAKER_01: I think again, going back to some of this other um, you know, maybe maybe repeating some of these is again a lot of narrative data points that are extensive.
• 21:57
  SPEAKER_01: And then you do see overlap even within.
• 22:00
  SPEAKER_01: And the governance standards, I think uh we see that a lot, especially with the social standards, where there's a lot like what are the remediation, how are you interacting with your stakeholders?
• 22:09
  SPEAKER_01: And a lot of that overlaps with some of like the whistleblower requirements and that type of thing.
• 22:13
  SPEAKER_01: And so I think we're seeing, you know, overlap between those standards as well.
• 22:17
  SPEAKER_03: Yeah, and again, if I reflect on our PWC letter, some of these bigger themes are in there, particularly related to GHG.
• 22:24
  SPEAKER_03: But then we did have our attachment with 75 plus uh specific recommendations which overlap there.
• 22:30
  SPEAKER_03: One point maybe we should make again, you mentioned that this is from the May 21st meeting of FRAG.
• 22:36
  SPEAKER_03: And I do want to let our listeners, viewers know that that meeting actually is public and the materials are available, although quite hard to find.
• 22:46
  SPEAKER_03: And so none of this is, you know, coming from us.
• 22:49
  SPEAKER_03: This is a summary of what happened in that meeting.
• 22:51
  SPEAKER_03: But if you are interested in more detail, highly recommend that you actually check out that recording because again, you can watch the actual discussions.
• 22:59
  SPEAKER_01: Yeah, and I think that's like a good point, is a lot of these meetings, like if companies are wanting to stay up on this, there is a lot that's publicly available meetings.
• 23:07
  SPEAKER_01: They do have presentations that are out there, so you can sign up to get email updates and that type of thing if you really want to stay on top of it.
• 23:14
  SPEAKER_03: Yeah, it could really keep you busy very full time if you did that.
• 23:17
  SPEAKER_03: But nonetheless, it's very helpful.
• 23:19
  SPEAKER_03: Um, and obviously we'll continue to bring updates.
• 23:21
  SPEAKER_03: So I know this is early days, but anything then on where we think F-RED may go with the exposure drafts.
• 23:29
  SPEAKER_01: Yeah, and maybe I'll I'll highlight a couple things and then there's some of the reliefs that that we've heard that they're considering, which I think could be really helpful to companies.
• 23:37
  SPEAKER_01: So one of the kind of overarching things, which again is, you know, I think addressing the feedback inconsistent with some of the the at least recommendations that we provided is a simplification of the minimum disclosure requirements and, you know, really thinking about the architecture of the struct of the standards between ESRS2 and the topical standards, where we've seen a lot of interaction and a lot of complexity.
• 24:00
  SPEAKER_01: So trying to streamline and simplify that, which I think is great.
• 24:05
  SPEAKER_01: And then some of the reliefs that we're seeing them consider is one is um under IFRS S1, they have this concept of undue cost and effort.
• 24:15
  SPEAKER_01: And there's some reliefs related for companies related to not having to expend undue cost and effort.
• 24:22
  SPEAKER_01: And I think seeing that coming over to ESRS would be really helpful and help with interoperability and be like, you know, a much appreciated relief by preparers.
• 24:34
  SPEAKER_01: Um, another thing is the expansion of the concept of materiality of information.
• 24:39
  SPEAKER_01: We've heard that they are going to expand that across all the disclosure requirements and data points, which right now, you know, there's certain data points that are or disclosure requirements, both of them, that are required regardless of materiality.
• 24:53
  SPEAKER_01: So I think applying it and then even within a data point, maybe being able to apply the concept of materiality of information.
• 24:59
  SPEAKER_01: So I think those two are going to be appreciated as well.
• 25:03
  SPEAKER_01: The next is within the standards right now, it's very clear that the use of estimates is allowed within when a company is reporting on information in their value chain.
• 25:14
  SPEAKER_01: It was not as clear that you could use the companies could use estimates within their own operations.
• 25:19
  SPEAKER_01: I think our firm view was that companies were allowed to do that.
• 25:22
  SPEAKER_01: But I think the explicit discussion around that and the standards and allowing that is an important piece.
• 25:29
  SPEAKER_03: Yeah, and that one's interesting because I think from a practical point of view, even with own operations, you would not be able to prepare the information without estimates.
• 25:37
  SPEAKER_03: And I think our view that we talk about in SRG5 is really more so what are the right boundaries to make sure those estimates are, you know, well thought through, you know, and based on the right secondary data, et cetera.
• 25:52
  SPEAKER_03: And so it will be interesting to see, I mean, with all of these areas, how they've taken these recommendations and where they go with them.
• 26:00
  SPEAKER_01: Any other final, maybe one final one, just because I do know this is um, this has been an area that's been discussed a lot as well, is around like business combinations.
• 26:09
  SPEAKER_01: So acquisitions or dispositions that companies are making is allowing some relief for maybe a year period for companies to have to either include the um impacts, risks, or opportunities, sustainability-related impacts, risks, or opportunities in the report, or allow you know, a year for for companies to you know adjust for any dispositions that have taken place.
• 26:30
  SPEAKER_01: And I think, especially when we think about if a company's making an acquisition or a disposition late in the year, that that that can be really challenging to be able to do the you know complete double materiality assessment in in a short period of time.
• 26:43
  SPEAKER_03: Yeah, although this is also interesting if you go back to sort of the baseline of ESRS connectivity with the financial statements, the very core, I'll use sort of principle here.
• 26:55
  SPEAKER_03: And so something like this that would give relief that was more than just time-based relief, but actually relief from reporting, if they even go in this direction, uh, would be going against that principle.
• 27:08
  SPEAKER_03: And I do think all of this, if you think through the feedback, you even think through some of what we hear, they may be considering, is you kind of take a step back and say, okay, what are the principles underlying ESRS?
• 27:20
  SPEAKER_03: And then which of these are chipping away at those principles, and then at what point you sort of lose the basis?
• 27:27
  SPEAKER_03: And again, I don't want anyone leaving this saying that they're thinking that I, Heather, or even PwC are not supportive of these changes because in particular, some of them are ones, you know, the firm or many of these, the firm is a proponent of, and we do think is it's consistent with the spirit of ESRS.
• 27:46
  SPEAKER_03: But it will be interesting when we start to be able to see some drafts, where they went and how they balance this difficulty, like with this business combinations with these underlying principles.
• 27:58
  SPEAKER_01: Yeah, it'll be interesting.
• 27:59
  SPEAKER_01: And I think to your point, you know, are they able to put some guardrails around it?
• 28:04
  SPEAKER_01: You know, for for example, if they they are aware of like material impacts, risk or opportunities, you know, are they able to provide some sort of color related to, you know, acquisitions and dispositions?
• 28:14
  SPEAKER_01: I think to be seen, I think, in the drafts as to how these concepts, you know, it's one thing to talk about it, but then the drafting of it is is always the challenge, right?
• 28:23
  SPEAKER_03: Agree.
• 28:24
  SPEAKER_03: So, Diana, may maybe to wrap things up today, then just taking a step back, obviously you were on the podcast about a month ago, we were talking about changes.
• 28:33
  SPEAKER_03: I think probably on about a month from now, or maybe towards later in July to give more updates.
• 28:39
  SPEAKER_03: But if you are a company that's potentially impacted by these changes, and you know, if I reflect back on that survey where that, you know, again, what's their bias or not, but nonetheless, at least those companies surveyed said we'd rather have things left alone.
• 28:55
  SPEAKER_03: And so if you're a company that's trying to anticipate and trying to see how do you move forward with this, any advice?
• 29:03
  SPEAKER_03: You know, it's not that long before we'll see the drafts, but I still think there's some companies that feel like they're pretend like losing time.
• 29:10
  SPEAKER_01: Yeah, and what I've heard is that, you know, I think one is continuing to do your double materiality assessment.
• 29:16
  SPEAKER_01: They have not in any way indicated that they're backing off of double materiality.
• 29:20
  SPEAKER_01: You know, I think there could be some slight changes around the concept of materiality, but the core concept of identifying your material impacts, risks, and opportunities is not going away.
• 29:29
  SPEAKER_01: And so I think companies continuing to work through their double materiality assessment is important.
• 29:34
  SPEAKER_01: And then thinking about, therefore, what what types of information would they provide?
• 29:38
  SPEAKER_01: Because I think as we've talked about, even if some data points are eliminated within the topical standards, you still potentially have these entity-specific information that you're gonna need to provide.
• 29:49
  SPEAKER_01: And then I think the other thing is like this is really uh, you know, in many cases, the companies that are focused on the impacts that these risks will have on their business and what is their, you know, whether they're transitioning to a low, lower carbon economy or they're thinking about how are they gonna respond to different physical risks or transition risks, that's really about like the survival of their business over the long term.
• 30:14
  SPEAKER_01: And so I think companies that are really focused on how are we going to be resilient, you know, through these changes, I think that's just gonna be core to their business, regardless of what the reporting is, right?
• 30:26
  SPEAKER_03: Yes, and I can see your uh lens of being our co-chair of our environmental working group there, but I I agree completely with the point you're giving.
• 30:34
  SPEAKER_03: And maybe the other point I would give is we're not going to go into detail, obviously, because this is a podcast on ESRS, but on May 29th, CARB, so the California Air Resources Board did meet to talk about the California disclosure rules, including the GHG disclosure requirements and then the TCFD disclosure requirements, which I will remind companies are due January 1st, 2026, and then GHG sometime in 2026.
• 30:59
  SPEAKER_03: So I only bring that up here because for most multinationals and many of the companies that are listening to us, they need to be concerned about ESRS, but they equally, or if not more so, need to be thinking about those California requirements.
• 31:12
  SPEAKER_03: So, you know, there's a lot to pay attention to.
• 31:15
  SPEAKER_03: And so you definitely don't want to kind of lose sight of what's upcoming.
• 31:20
  SPEAKER_01: And I think, you know, under ESRS, you have impacts, risk, and opportunities.
• 31:24
  SPEAKER_01: And then under California, risk and opportunities.
• 31:26
  SPEAKER_01: Under ISSB, you'd have risks and opportunities, or I guess California, we could talk about whether it's just risk.
• 31:30
  SPEAKER_01: But either way, you kind of have so completing this double materiality assessment, then you can take the material pieces that you need to report from that.
• 31:39
  SPEAKER_01: So that's why I think like it's foundational to everything.
• 31:42
  SPEAKER_01: So so I think you're not, you know, wasting any time if you're focused on that.
• 31:47
  SPEAKER_03: All right.
• 31:48
  SPEAKER_03: So I'm not sure that's a most positive word to end on.
• 31:51
  SPEAKER_03: But any other final thoughts for our audience before we wrap things up today?
• 31:55
  SPEAKER_03: I think that's it for today.
• 31:56
  unknown: All right.
• 31:57
  SPEAKER_03: Well, Diana, it's always such a pleasure to talk to you.
• 31:59
  SPEAKER_03: Thanks so much for joining me today.
• 32:01
  SPEAKER_03: Thanks, Heather.
• 32:02
  SPEAKER_03: And then to our audience, thank you as well for joining us today.
• 32:05
  SPEAKER_03: And as I mentioned at the top of the podcast, I highly encourage that you check out our past episodes related to Omnibus with more detail.
• 32:13
  SPEAKER_03: Those were released in March and in May.
• 32:15
  SPEAKER_03: And then in addition, we're continuing to release other episodes related to the California rules, related to GHG reporting.
• 32:22
  SPEAKER_03: And we also will have an upcoming episode talking about some proposed amendments to the ISSB standard, specifically related to some of the climate disclosures.
• 32:32
  SPEAKER_03: So I encourage you to check out that one as well.
• 32:34
  SPEAKER_03: And you can find us at viewpoint.pwc.com.
• 32:37
  SPEAKER_03: Thanks again for joining us today.
• 32:40
  SPEAKER_02: That's our show for today.
• 32:42
  SPEAKER_02: Tune in next week for more fresh episodes.
• 32:45
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• 32:48
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• 32:52
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• 33:02
  SPEAKER_02: From Thought Leadership at PWC, I'm Heather Horn.
• 33:06
  SPEAKER_02: Thanks for tuning in.
• 33:13
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• 33:17
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