European Commission proposes to delay additional CSRD reporting standards

The European Sustainability Reporting Standards specify the information that companies will need to report under the EU’s Corporate Sustainability Reporting Directive. As discussed in one of our prior posts, the first set of ESRS were adopted by the European Commission in July. That set includes ten topical standards that each cover a particular sustainability topic (for example, ESRS E1 covers climate change) and two cross-cutting standards that contain general disclosure principles and requirements. 

The CSRD contemplates the adoption of additional sector-specific reporting standards and standards specific to non-EU companies that are required to report under the CSRD. On October 17, the European Commission proposed delaying the adoption of these additional standards, as further discussed below. 

Sector-specific reporting standards

The ESRS adopted in July are sector-agnostic. In 2022, EFRAG began developing sector-specific standards. Under the CSRD, EFRAG was appointed technical adviser to the European Commission to develop draft ESRS. EFRAG’s current workplan includes standards specific to the following sectors:

• Oil and gas
• Coal, quarries and mining
• Road transport
• Agriculture, farming and fisheries
• Motor vehicles
• Energy production and utilities
• Food and beverages
• Textiles, accessories, footwear and jewellery

As part of its 2024 Commission Work Programme, the European Commission is proposing to push back the deadline for the adoption of sector-specific standards by two years – from June 30, 2024 to June 30, 2026. The Commission has indicated that the delay will allow companies to focus on the implementation of the first set of ESRS adopted during July 2023 and ensure that EFRAG has time to develop sector-specific ESRS that are efficient and limit the reporting requirements to the minimum necessary.

Reporting standards for non-EU companies

The European Commission also has proposed delaying the deadline for adopting standards that specify the reporting obligations of non-EU companies required to report under the CSRD. As we have written about previously, the CSRD will require non-EU parents to report group-wide sustainability information if they have over €150 million in EU annual turnover for each of the trailing two financial years and at least one EU subsidiary that is a large undertaking under the Accounting Directive or an EU branch that generated net turnover of more than €40 million in the prior financial year. That requirement takes effect beginning with the 2028 financial year.

The CSRD currently requires the European Commission to adopt disclosure standards for non-EU parent companies by June 30, 2024. The Commission also has proposed to push back that deadline until June 30, 2026. The rationale for this change is that the delay will allow more resources to be dedicated to the development of effective and proportionate sector-specific ESRS, while still giving enough time for non-EU parent companies to prepare for reporting, since their reporting requirements do not begin until the 2028 financial year.

Five takeaways

• A delay in sector-specific ESRS will be a welcome reprieve for companies in those sectors. However, even in the absence of sector-specific ESRS, in some cases a reporting company may need to provide supplemental disclosures specific to the nature of its business. ESRS 1 (General Requirements) indicates that, when an undertaking concludes that an impact, risk or opportunity is not covered, or not covered with sufficient granularity, by an ESRS, but is material due to its specific facts and circumstances, the undertaking is required to provide additional entity-specific disclosures to enable users to understand the undertaking’s sustainability-related impacts, risks or opportunities. 
• In contrast, a delay in reporting standards for non-EU parent companies will not be welcome. Non-EU parent companies will have a longer period of uncertainty before their specific reporting obligations are set. They will need to plan for CSRD compliance without the benefit of specific non-EU parent reporting requirements or accommodations that may be adopted by the European Commission. In particular, the delay will impact non-EU multinationals that plan to early report for the entire parent company group. 
• The European Commission’s proposal would delay the adoption of additional ESRS. It would not push back the deadline for when subject companies need to start reporting under the CSRD. 
• The Commission’s proposal requires the approval of the European Parliament and Council. Although this is widely expected to occur, the proposal is not yet a done deal. Note that there already has been a push within the Parliament to reject the first set of ESRS adopted by the European Commission, on the grounds that they are too onerous. A resolution to reject those ESRS came up for a vote on October 18. Although the resolution did not pass, 261 members of Parliament voted for the resolution (359 voted against, i.e., supported adoption of the first set of ESRS). 
• The European Commission’s proposal would not require transposition by EU member states. The proposal would impact the Commission’s deadlines to adopt delegated acts. It would not require member state implementation.

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