Good morning everybody, and welcome to another edition of C&F Talks, in which I get to interview one of the speakers at a forthcoming C&F conference. Today, it's my pleasure to have with me Patrick de Cambourg, Chair of the EFRAG Sustainability Reporting Board. Patrick's going to be joining us at the Third Annual Climate Transition Plan Summit, which is being held in London on the 24th of March. Patrick, welcome.

Good morning to you.

Great to have you with us. Let's turn to our first question.

How will the Omnibus Package affect the EU Corporate Sustainability Reporting Directive, the CSRD, and the Corporate Sustainability Due Diligence Directive, the CSDDD?

Well, first of all, the objectives of the Commission has been reaffirmed regarding the importance of the Green Deal. Now, the CSRD, as adopted in 2022, required adjustments, in particular on the very critical point, which is the scope of companies that have to apply a mandatory regime of reporting. It is true that at EFRAG we were confronted with a dilemma, because it is very difficult to draw standards for very large multinationals, and at the same time to draw the same standards for companies that have 251 employees.

So, large in the EU not being that large, because it goes from 250 employees to the maximum number possible, it was a challenge. So, we had the opportunity to mention to the Commission that the Draghi recommendation to create a mid-cap category was a good idea. And at the moment, the proposal which is tabled by the Commission is with the threshold of 1,000 employees.

So, any company over 1,000 employees would be in scope, and the ones below would be subject to a voluntary regime. They could, if required. In the press conference where the Commission presented the proposals, which will be discussed by the co-legislators, the Commissioner in charge, Maria-Louise Albuquerque, mentioned that she felt that the largest of this range of companies between 250 and 1,000 employees, the largest ones would probably be encouraged to adopt a voluntary standard due to the relationships that they have with larger entities and also with banks.

Okay.

This is the most critical point, if I may. The other points are more generic. There is a requirement which is not in the omnibus per se. There is a commitment from the Commission to streamline the first set of ESRS, the first set of standards, in order to take stock of the first implementation. Because as you know, the first wave of implementers is now delivering the outcome of their work. They are publishing now, as we speak, the reports, the sustainability statements as required by the CSRD.

Okay. So essentially, it is making it a bit more proportionate and streamlining.

But turning to the CSRD, how will that impact UK companies, particularly those that trade with or have subsidiaries in the EU?

First of all, if you have subsidiaries or branches, as if you have subsidiaries in the EU that qualify, so that would be over the 1,000 threshold, they would be in scope. The other ones would not be in scope. So, that's a direct impact, so that there is a change. Before that, it was for 250 employees, over 250 employees. So, assuming that the threshold is not modified by the co-legislators, of course.

The other point is that if you had more than £150 million of turnover in the EU, then you would have to report at group level on a number of topics. This is the so-called Article 40A of the directive. This one is not changed, but the threshold is changed in the proposal. It's moving from £150 million to £450 million.

Yeah. So, two ways in which you might qualify to have to comply.

What steps do you think the UK companies should be taking now to align with EFRAG's transition plan implementation guidance to stay ahead of EU sustainability reporting requirements?

Regarding transition plans, we have finalised at technical level our implementation guidance number four on climate transition plans. I say technical because we had – it was a long process, and early 2025, we decided to finalise the document. But normally, this document has to go out for public feedback for a period of 30 days for two reasons. It was judged that it was not appropriate to do it immediately.

First of all, the omnibus, where, of course, we didn't know when we approved the technical version, which is available on the website. We didn't know exactly if there would be consequences. We don't think there are significant ones on transition plans for climate change.

Second, it was not the best moment for companies to reply because they were closing their books and closing also preparing their sustainability statements. So, we decided together with the Commission that we would wait for a period of time.

Probably, we will ask public feedback in April or about April or early May. That being said, this document is interesting and is available. It is, I think, in many respects relatively close to the TPT recommendations. So, I don't think that UK companies that have followed the TPT work would be in a difficult position to innovate on new features.

Okay.

That question of alignment is quite interesting. With the UK developing its own sustainability reporting frameworks, how do you see the UK and EU regulations aligning or diverging in the future?

Well, you know that we made every effort together with the ISSB, so it is a joint effort, to create a very high level of interoperability. We tend to say that when someone is reporting under ESRS as adopted in 2023, they comply with the ISSB requirements, S2 but also S1, subject to, on climate, a few nuances that they have to consider. For instance, we are not covering financed emissions because we felt that it would be for the sectors that have that specific element to consider.

Now, these are quote-on-quote important but minor differences that you can address easily. In the document, which was published jointly by ISSB and EFRAG, you see very clearly that when you go from ESRS to ISSB, you have a few points to consider. The other way around is a bit more difficult, but in general, I think that the level of interoperability can be qualified as high or very high.

So when moving from ESRS to ISSB, very limited problems. The other way around is a bit more difficult, but if your national regulation is aligned, more or less, with ISSB, you should find yourself in a position that is pretty positive in terms of alignment.

Yeah. That's good news that people don't have to have two very divergent sets of standards to comply with. Patrick, that's very interesting.

For our viewers, we very much hope you'll join us at the conference itself, where you'll hear further discussion on this and other issues. That's the Third Annual Climate Transition Plan Summit, 24th of March in London. Further information available on our website, www.cityandfinancial.com.

Patrick, a pleasure to speak to you. Look forward to seeing you at the conference.

Thank you very much. Bye-bye.