CSRD will come into effect for 50,000 European companies, and with many organisations not on track to comply. The actual deadline for many companies having to apply the new rules for the first time in the 2024 financial year, for reports published in 2025, however a two – year delay has been announced this week by the EU Commission.
Up to this week, companies subject to the CSRD would have had to report according to European Sustainability Reporting Standards (ESRS).
The CSRD is a revised version of the EU’s Non-Financial Reporting Directive. Companies under the CSRD will need to report using the European Sustainability Reporting Standards (ESRS). These changes bring a whole new way of doing sustainability reporting and have been published on 31 July 2023.
Changes to CSRD Implementation.
The EU Commission has announced on 17 October 2023 – when outlining their 2024 Work Programme that the EU Commission wants to reduce ESG reporting requirements by 25%, to help “. . . boost and provide relief for E.U. SMEs” as part of its strategy on long-term competitiveness and reducing burdens associated with reporting requirements, without undermining the policy objectives of the concerned initiatives. To achieve this goal, the Commission wishes to simplify reporting requirements. One area of note to environmental practitioners and business in general is the postponement of the deadline for the adoption of sector-specific European sustainability reporting standards (the Corporate Sustainability Reporting Directive nor CSRD). The key information source is a “Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2013/34/EU” done at Brussels, 17 Oct 2023 and available at COM(2023) 596 final 2023/0368 (COD).
What this meant for business.
For businesses concerned about CSRD and its proposed Procedures or European Sustainability Standards (ESRS) this will have meaningful impact. We recall that the first set of ESRS were adopted by the Commission on 31 July 2023 and are now subject to the scrutiny of the European Parliament and of the Council. The ESRS in this first set of “procedures” are sector agnostic, meaning that they apply to all undertakings under the scope of the CSRD, regardless of which sector or the undertaking or business operates in.
The specific change in rules and thus what this now means for businesses
Directive 2013/34/EU is amended as follows:
(1) The deadline for the Commission to adopt sector-specific ESRS by way of delegated acts under Article 29b(1), third subparagraph, is set by 30 June 2026 (instead of by 30 June 2024)
(2) The deadline for the Commission to adopt ESRS for non-EU companies meeting certain thresholds by way of delegated acts under Article 40b is set by 30 June 2026 (instead of by 30 June 2024).
Thus there is a two-year delay in implementation of CSRD compliance obligations for certain organisations.
Organisations subject to this “delayed” implementation include:-
If a firm meets two of these three criteria, the CSRD rules will apply from 30 June 2024 – that is in eight months time:-
1) €40 million in net turnover
2) €20 million in assets
3) 250 or more employees
Firms which do not meet these criteria have another two years to achieve compliance or 32 months.
The relaxation applies to SMEs – which is good news for many smaller businesses.
