The European Council recently announced a two-year delay in the full enactment of the Corporate Sustainability Reporting Directive (CSRD), pushing back the adoption of sector-specific sustainability disclosure standards and reporting obligations for non-EU companies to 2026. The directive, adopted in November 2022, aimed to create reporting obligations for both publicly traded and privately held businesses in the EU starting in 2024. The European Sustainability Reporting Standards (ESRS) were to be developed by the European Financial Reporting Advisory Group (EFRAG), with the first round adopted in July 2023 and set to take effect in 2024.
The ESRS encompass environmental, social, and governance reporting requirements, aligning with the International Financial Reporting Standards Foundation’s Sustainability Disclosure Standards that address greenhouse gas emissions, climate action, and other green initiatives. Initially applicable to publicly traded and large privately held companies, the ESRS will eventually include small and medium-sized businesses as well as certain non-EU companies meeting specific criteria. In line with the CSRD, sector-specific standards were to be developed by EFRAG, though delays led to a directive instructing the organization to focus on improving guidance for the general ESRS instead.
The European Parliament’s Legal Affairs Committee approved a proposal to officially delay the implementation of sector-specific ESRS in late January, with the final decision made by the European Council on April 30. Consequently, the implementation of sector-specific standards will be postponed until 2026, along with the adoption of general sustainability reporting standards for non-EU companies. As the landscape of ESG and sustainable reporting faces resistance and scrutiny from the business sector, it is anticipated that further revisions to the CSRD, particularly regarding SMEs, may be on the horizon. The outcome of the 2024 EU elections in June could also impact the timeline of other sustainability initiatives.
Overall, the delay in the full enactment of the CSRD allows for additional time to refine and align the sustainability reporting standards and obligations for businesses within the EU. While the initial target date for implementation has been pushed back by two years, the focus remains on enhancing the quality and relevance of reporting in line with global sustainability efforts. With ongoing developments in the ESG reporting landscape and the potential for future regulatory changes, businesses are advised to stay abreast of updates and adapt their reporting practices accordingly to ensure compliance and transparency in their sustainability efforts.
