A Step Back: EU Proposes to Water Down CSRD Elements

The Corporate Reporting Sustainability Directive is set to oblige sustainability disclosures among businesses within the EU from the beginning of 2024.

However, the European Commission has now delayed key aspects of the CSRD, after lawmakers raised concerns that businesses do not have enough time to adopt certain corporate reporting requirements.

The first elements of the ESRS have been adopted. These elements set out sustainability reporting requirements that are not sector-specific.

However, the EU has delayed the adoption of a second set of ESRS rules, which outline sustainability information for companies to report information relating to industries in which they operate.

Why has the EU delayed the ESRS?

According to the Commission’s proposal, the postponement of each of these rules will fulfil objectives including “allowing companies to focus on the implementation of the first set of European Sustainability Reporting Standards” and to “ensure time to develop sectoral ESRS that are efficient”.

It has also said that it seeks to “limit the reporting requirements to the minimum necessary.”

How did industry stakeholders react?

The delay in adoption has received mixed reactions from industry stakeholders.

“For Multinational firms with multiple business units across Europe, this divergence could be tricky to manage and obviously needs to be tracked between now and the first reporting being required,” Michaela Walker, Partner and European Head of Financial Services Sector at law firm Eversheds Sutherland, said.

However, James Marlow, Environment and Climate Change Managing Associate at law firm Linklaters, said the delay could provide a “welcome breather” to focus on implementing the first batch of reporting requirements properly.

Amid the ongoing political lobbying, it can be difficult for businesses to keep up.

The delay, however, does not mean that expected reporting criteria are not to be met.

Businesses that leverage the extra time given before mandatory CSRD disclosures fully enter into force will be at an advantage.

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