Yvonne Zwick
Chairwoman of B.A.U.M. e.V.
Yvonne Zwick, Dipl.theol., Chairwoman of B.A.U.M. e.V. since 1.1.2021, has held various positions in the office of the German Council for Sustainable Development since 2004. Most recently, she was Deputy Secretary General and Head of the German Sustainability Code Office. She works as an expert in the SME expert working group of the European Financial Reporting Advisory Group – EFRAG, which is developing the European sustainability reporting standard for SMEs.
She spoke with Thomas Mog, Net Zero Banking Alliance Germany Project Manager on the occasion of her recent appointment to the EFRAG SME working group.
Thomas Mog: Dear Yvonne, you have already helped shape the development of a social-ecological economy in numerous positions. Now, since November 2021, you have also become an honorary member of the European Financial Reporting Group, where you are responsible for SMEs. Congratulations on this appointment, which has made you an ambassador for German SMEs at the EU level!
Yvonne Zwick: Thank you! I’m delighted too!
How did you join EFRAG? How does such a selection process work?
Yvonne Zwick: Basically, I came from “the sticks to the woods” – from the DRSC Nomination Committee, where I would never have expected to become a member, I went on to think that I could not be so completely wrong with EFRAG. There was an official application procedure, a call from EFRAG to apply for the Expert in Working Groups. I asked around, asked smart people here and there whether they would consider applying. I then knew from one person that he would apply. Shortly before closing time, I threw my hat into the ring and revealed my profile – according to the motto that they would come back it if they needed someone like me.
What is EFRAG’s role in shaping the European standards for sustainability-related reporting?
Zwick: : In April 2021, the European Commission made a legislative proposal for a Corporate Sustainability Reporting Directive (CSRD) to replace the Nonfinancial Reporting Directive. One of the key provisions is that companies falling within the scope of the directive must report in accordance with the European Reporting Standards (ESRS), which will be adopted by the European Commission as delegated acts. EFRAG has been mandated by the EU Commission to develop draft standards for CSRD reporting. It organises this in a multi-stakeholder process with a Project Task Force (PTF-ESRS).
How is EFRAG’s work structured and what are the working groups?
Zwick: PTF-ESRS comprises 35 members with a justified interest in sustainability reporting. They come from 13 EU member states and from all relevant sectors. The PTF is supported by an office that strongly structures the work process, for example by working in ten clusters within the PTF. For the ten cluster topics, there are eleven expert working groups with another 70 or so members. The process is very structured. In view of the ambitious time target, there is probably no other way to achieve a result. After all, the European sustainability reporting standard is to be completed by June 2022 and adopted in the European Parliament in October, so that it can be the basis for the reporting processes of European companies from next year.
“Basically, I came from “the sticks to the woods” – from the DRSC Nomination Committee, where I would never have expected to become a member, I went on to think that I could not be so completely wrong with EFRAG.”
What is your task in the SME working group?
Zwick: My role is to provide input with technical expertise on working paper drafts and comment on preliminary WG drafts of the standards before they are further consolidated and then put out to public consultation. For the SME reporting standard, this is planned for summer 2022. I bring my experience with the standard-setting process and the practical application of the Sustainability Code as well as the perspective as Chair of B.A.U.M. e.V. – i.e. more than ever with the lens of applicability in companies that want to use established process structures as far as possible and differentiate themselves in the market with sustainability performance. Clear frameworks and the definition of report contents tend to be welcomed in our community – especially if they help to make concrete impacts and efforts transparent and develop a competition-changing character. I channel this perspective of forward-thinking companies in our network into the SME working group.
To what extent do discussions in EFRAG take place on a principles-based basis and where is the focus more on a granular, technical approach? Are there any compromises emerging?
Zwick: As I understand it from the first batch of working papers from the working groups published in January, the PTF-ESRS process is also approaching the topic via a principle-based approach. I find the “rule of three”, as Patrick de Cambourg calls it, to be very helpful: to prepare the standards on the first level sector-independent – for maximum comparability, then via sector-specific – for maximum relevance, to company-specific, reflected in the respective sustainability report. The three reporting areas: strategy, implementation and performance measurement also complete the development from general to a specific level. And if you look at the prototype for the climate standard, you will quickly see that this becomes quite detailed and is specified in data points.
How do the results of EFRAG’s work feed into the political process? Will the EFRAG’s recommendations be directly applied?
Zwick: As the proposed directive for the CSRD already contained the reporting standards still to be developed by EFRAG, it is foreseeable that the ESRS will enter into force after adoption by the EU Commission through delegated acts. They will then be more than a recommendation for reporting entities. They will then be the standard with which the EU reporting obligation is fulfilled – as the name already entails.
The work on the European standard for sustainability-related disclosure is certainly multi-layered and complex. To which aspects of the work within EFRAG is this particularly true? What do you see as the most promising approaches to meeting the challenges?
Zwick: The one side is the practical complexity of the work – the sheer organisation of the multi-stakeholder process with the different formats and compositions for collaboration. The other is the complexity of the content, whereby companies that have already grown into the reporting world with the simple structure of the Sustainability Code, which at some point was aligned with the structure of the NFRD / CSR-RUG, have a clear advantage here. They will recognise the conceptual guidelines and cross-cutting standards in the PTF-ESRS structure, for example, as the overarching sustainability concept and the environmental, social, human rights, governance and compliance concerns form individual pillars that support the sustainability concept. For an overview, I recommend EFRAG’s interim report from November 2021 – The complexity in the process and the standard architecture has been illustrated by EFRAG in a diagram. It will also help, when it comes to reporting at some point, to have the goal in mind for which this whole exercise is being undertaken: to create a liveable future with an underlying sustainable economic activity. That is worth every effort!
Mog: Thank you for sharing your insights, Yvonne, and all the best in finding the right balance between impact and practicality for the reporting companies.
Zwick: My pleasure!