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published on 17 February 2025 I reading time approx. 3 minutes
On November 4, 2024, EFRAG published the draft of the fourth implementation guideline “Transition plan for Climate Change Mitigation” (IG 4) for the CSRD. This focuses on the ESRS E1-1 disclosure requirements for the transition plan for climate change mitigation. Specifically, the guidelines contain information on the elements of a transition plan and reporting on progress. With regard to E1-1, it also contains explanations on scenario analysis, “just transition”, as well as the consideration of the value chain and Scope 3 emissions in the transition plan. This draft is to be made available for public consultation at the beginning of 2025 and finalized by the middle of the year.
As part of the European Sustainability Reporting Standards (ESRS), the European Financial Reporting Advisory Group (EFRAG), as an advisory body and developer of the ESRS, has been commissioned by the European Commission to produce Implementation Guidance (IG). These implementation guidelines are intended to provide companies with targeted and timely support in preparing a CSRD-compliant sustainability report. However, the guidelines are explicitly non-binding support.
The three implementation guides published to date deal with conducting the materiality analysis (IG 1), considering the value chain in the materiality analysis and reporting (IG 2) and listing all data points that can be derived from the ESRS (IG 3). On December 20, 2024, EFRAG published an addendum to the IG 3 data point list, which contains a limited number of clarifications and corrections based on suggestions received from stakeholders. EFRAG has also announced that it will publish an updated version of the data point list in spring 2025, which will be published after the first cycle of ESRS reporting. This new version will include the clarifications and corrections already published, as well as any further clarifications resulting from new questions and answers that arose during the reporting season.
The draft IG4 comprises 59 pages and consists of five chapters. After an introductory chapter, the EU regulatory framework for the reporting obligations for transition plans is first explained. The reporting obligations of ESRS E1-1 paragraph 16 are then explained in more detail. This includes a precise description of the disclosure requirements as well as references to other ESRSs to which reference is made. This is followed by more detailed explanations, including the compatibility of targets (in relation to the Paris Agreement as mentioned in paragraph 16a) and decarbonization levers (part of paragraph 16b). The fourth chapter establishes the link to other international and EU regulations such as the EU taxonomy or CSDDD. Finally, there is a FAQ chapter consisting of 21 questions and answers regarding the transition plans and the implementation of their reporting obligation under the ESRS.
The IG4 currently still has to be approved by EFRAG's Technical Expert Group on Sustainability Reporting (SR TEG) and the Sustainability Reporting Board (SRB) before it is released for public consultation. EFRAG is also planning further guidelines on other ESRS standards to support companies in implementing their reporting obligations.
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