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New Changes Affecting Sport Orgs in Sustainability Reporting
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The EU’s new Corporate Sustainability Reporting Directive sets out to support micro-, small- and medium-sized undertakings.

In this article we’ll be unpacking the Voluntary European Sustainability Reporting Standards for Non-listed Small- and Medium-Sized Enterprises (VSME ESRS) Exposure Draft.

There’s a lot of acronyms here. And there’s even more to come. Plus a whole load of sustainability jargon. Before we get into it, let’s break down what this draft Standard is and why it is an important document for sport organisations. 

What is this draft Standard? 

You may be aware of the EU’s new Corporate Sustainability Reporting Directive. Under the CSRD, with the objective to transition to a sustainable EU economy, listed EU companies with more than 500 employees have to report on this year’s sustainability impact next year, in 2025. 

The year after that, in 2026, large undertakings that meet two of three key criteria – as set out very nicely by Grant Thornton LLP in the diagram half way down this page – will have to report. And following that, in 2027, it’s the turn of the listed SMEs, and finally – as far as plans currently go – it’s over to third-country undertakings. 

So, back to the question, what is this voluntary draft Standard? Well, as it says, it sets out to support micro-, small- and medium-sized undertakings in:

a) contributing to a more sustainable and inclusive economy;

b) improving the management of the sustainability issues they face;

c) providing information that will help satisfy data demand from lenders/credit providers and investors, therefore helping undertakings in their access to finance;

d) providing information that will help satisfy the data demand needs of large undertakings requesting sustainability information from their suppliers.

Points a) and b) are both very valid, but I’ve underlined c) and d) above to emphasise the importance that will need to be placed on providing existing partners required under the CSRD with the data they need from their partners AS WELL AS on demonstrating credibility to potential new partners. 

Why is it important for sport organisations? 

Part of the answer to this question is covered in the previous section. Those sport organisations that are listed on stock markets in the EU – as, for example, many top-tier football clubs are – then they’ll be required to report in the coming years. 

As for those that fall under this voluntary draft Standard, the EU defines micro-, small- and medium-sized undertakings as follows:

  • An undertaking is micro if it does not exceed two of the following thresholds:
    • €350,000 in balance sheet total,
    • €700,000 in net turnover, and 
    • 10 employees.
  • An undertaking is small if it does not exceed two of the following thresholds:
    • €4 million in balance sheet total,
    • €8 million in net turnover, or
    • an average of 50 employees.
  • An undertaking is medium if it does not exceed two of the following thresholds:
    • €20 million in balance sheet total,
    • €40 million in net turnover, and
    • 250 employees.

Again, the above undertakings fall outside of the scope of the CSRD and are therefore “encouraged” – for the reasons listed in the section above – to use this draft Standard to “prepare and share” their sustainability information. 

What’s in it that you should know? 

Where do I start? 

Let’s underline first of all that it’s an ‘exposure draft’, meaning that the Standard itself is not final. EFRAG, the company responsible for the draft – and, generally, for providing advice to the European Commission on ESRS – has opened this document for comments to be received by 21 May 2024 by completing this questionnaire. So this article is to give you a heads-up. You’re way in front of the curve at this point. It’s also worth knowing that, generally, things don’t change too drastically from draft to final version.

What’s useful about this draft Standard is that it takes much from the ESRS and from existing standards. I recognise a lot of the language from the GRI Standards, but also want to highlight that the principle of double materiality is prescribed – which considers GRI’s impact-focused materiality and other standards’ finance-focused materiality. Simply put, it asks undertakings to look at the impacts they cause, as well as the impacts that affect them.

But let’s back up again and I’ll go through some of the main points (as I see them) in the draft Standard in the order that they appear.

Here’s the technical stuff
  • This draft standard has no legal authority, unlike ESRS, as it falls outside of the scope of CSRD (but read above to see why it’s still relevant!)
  • It includes three modules that undertakings can use as the basis for preparation of the sustainability report
    • Basic Module – As the name suggests, it’s the minimum requirement, and does not require a materiality assessment
    • Narrative-Policies, Actions and Targets (PAT) Module – To be reported in addition to the Basic Module disclosures
    • Business Partners (BP) Module – Sets datapoints that are likely to be required by partners of the reporting org.
  • From the above modules, undertakings can disclose just A) Basic, or B) Basic and PAT, or C) Basic and BP, or D) all of them. 
  • Importantly for sport organisations, the inclusion of additional metrics not covered in this draft standard is deemed appropriate… This is a topic for another day.
  • The Basic Module disclosures include practices for transitioning towards a more sustainable economy; basic environmental metrics (such as total energy consumption, GHG emissions, impacts on biodiversity); social matters – essentially looking at the workforce, but also affected communities; and lastly business conduct (convictions and fines). 
  • The PAT Module looks first at the principles of materiality to be applied, with a suggestion to use the list of sustainability matters in Appendix 2 of the draft standard to guide on material matters. Concerning double materiality: 
    • Impact materiality should consider the severity of the impact based on:
      • Scale – how grave the harm caused to people of the environment
      • Scope – how widespread the harm caused
      • Irremediability (if that’s even a word) – whether and to what extent it’s possible to remediate the harm caused
    • Financial materiality should consider the probability, the nature, and the potential magnitude of the financial effects on the undertaking. 
    • Stakeholders can be categorised by two main groups (acknowledging that there is some overlap between the two groups):
      • Affected stakeholders
      • Users of the sustainability report 
  • The PAT Module then provides information on disclosures for policies, actions, and targets that are similar to other standards’ requirements.  
  • In the BP Module, the undertaking is required to disclose the material sustainability matters resulting from its materiality analysis. In addition, the BP Module has 11 of its own disclosures that are to be reported on if considered relevant. These include disclosing revenue from different sectors, such as controversial weapons; gender diversity ratio in the governance body; and work-life balance of employees.
  • The largest chunk of the draft Standard is there to provide further guidance on reporting in those three modules. 

And, coming back to the acronyms…? 

They should be pretty clear by now, but if not, here’s a recap:

BP – Business Partners Module

CSRD – Corporate Sustainability Reporting Directive

EFRAG – European Financial Reporting Advisory Group

ESRS – European Sustainability Reporting Standards

NFRD – Non-Financial Reporting Directive (Essentially being replaced by CSRD) 

GRI – Global Reporting Initiative Standards

PAT – Policies, Actions, and Targets Module

VSME ESRS – Voluntary European Sustainability Reporting Standards for Non-listed Small- and Medium-Sized Enterprises (!)

Where can you learn more? 

There’s a lot on the web as you can imagine, and some really useful stuff from the big consulting firms. But not a great deal that’s specific to sport (sigh). Rolf Schwery, at acting responsibly, did recently put out some dates for planned workshops to take companies through ESRS.

If you’re interested in learning more about how this could affect your organisation’s sustainability reporting, feel free to drop me a line to chat at [email protected]. In the meantime, here are some useful links for background reading. 

The European Commission on its Corporate Sustainability Reporting Directive: https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en

EFRAG’s announcement of the first set of ESRS: https://www.efrag.org/lab6?AspxAutoDetectCookieSupport=1#subtitle1

European Commission Q&A on ESRS: https://ec.europa.eu/commission/presscorner/detail/en/qanda_23_4043

GRI Standards on final adoption of ESRS: https://www.globalreporting.org/news/news-center/final-adoption-of-esrs-a-game-changer-for-mandatory-reporting/

EFRAG’s launch of the public consultation on Exposure drafts: https://www.efrag.org/News/Public-479/EFRAGs-public-consultation-on-two-Exposure-Drafts-on-sustainability-r

EFRAG educational videos on SME standards: https://www.efrag.org/News/Public-488/Launch-of-educational-videos-on-SME-standards

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