EFRAG publishes paper on enhancing connectivity and reporting boundaries in annual reports

Posted on July 7, 2024 by Editor

Last week the European Financial Reporting Advisory Group (EFRAG) published Connectivity considerations and boundaries of different Annual Report sections, a paper which forms part of EFRAG's research project on the interplay between financial and sustainability reporting.

The paper addresses the emerging concept of connectivity, which has been recently incorporated into mandatory sustainability reporting requirements such as the European Sustainability Reporting Standards (ESRS) and the IFRS Sustainability Disclosure Standards. The paper outlines the conceptual foundations, categories, and benefits of connectivity, emphasising the need for coherence and complementarity in annual reports.

Connectivity aims to build a bridge between the often-disconnected realms of financial and sustainability reporting, preventing duplicative disclosures and filling informational gaps. The paper discusses the grey areas in reporting boundaries, such as climate-related commitments and unrecognised intangibles, suggesting steps to mitigate these issues. Recommendations include leveraging XBRL tagging, developing a sustainability reporting conceptual framework, and enhancing management commentary guidance.

EFRAG Connectivity Advisory Panel Chairman Jens Berger and Subgroup Leader Leo van der Tas highlighted the importance of this paper in clarifying the concept of connectivity and its benefits. This kind of resource will help stakeholders in understanding the interaction between various components of annual reports, fostering transparency.

This paper adds to the growing focus on exploring and explaining the potential for connectivity. By promoting connectivity and setting clear reporting boundaries, EFRAG aims to improve the quality and usefulness of both financial and sustainability disclosures.

For further details and to access the paper, visit the EFRAG website.