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At the end of January, the European Parliament approved a proposal to delay the full enactment of the CSRD (Corporate Sustainability Reporting Directive) by two years. This proposal is set out to delay the adoption of the sector specific ESRS disclosure standards and the reporting standards for non-EU companies until 2026.
Two-year delay in developing sector-specific sustainability reporting standards and sustainability reporting standards for non-EU groups
The sector-specific standards for sustainability reporting aim to clarify what companies in sectors with a significant impact on the environment, planet and people should include in their report in the context of carbon footprint reduction, impact on biodiversity and human rights. The standards for the non-EU groups will define the specific reporting requirements that will apply to group headquartered outside of the EU that have a substantial activity in the EU.
The proposal to take more time to prepare the sector-specific and non-EU reporting standards until June 2026 may be a good move to better prepare those standards, but this will leave less time for non-EU groups should they like to apply their dedicated standard and not the full scope ESRS. Indeed, non-EU companies with a turnover in Europe of more than 150 million or with local EU affiliates with a turnover of 40 million will still have to report in 2029 on 2028 information as initially scheduled.
The idea behind this postponement of the deadline for both sector-specific and non-EU standards until June 2026 is to allow companies to focus on implementing the existing general ESRS reporting as set on 31 July 2023.
Delay equals procrastination?
Not really. Europe does intend to publish these sector-specific sustainability standards as soon as they are ready.
Sector-specific sustainability standards, and especially the ability to benchmark them within the sector, are of great value to stakeholders including investors, but also customers and consumers.
This postponement should allow EFRAG (European Financial Reporting Advisory Group) to develop these standards building on the experience and on the feedback of the implementation of the first 12 agnostic standards.
Going 'further' is sometimes better than going 'faster'
This sustainability reporting is crucial, but also administratively heavy. In recent years, companies have struggled with COVID-19, the energy crisis, and unrest between countries, etc. Competition policy should be short-term (2030) but also on a longer-term (after 2030) run and the report should become a valuable document.
Is taking more time to implement the first set of broader standards before evolving to sector-specific standards a good strategy?
Time will tell.
