On 7 February 2024, the European Parliament and Council of the EU reached a provisional deal on a draft directive amending the Corporate Sustainability Reporting Directive (CSRD) on the time limits for the adoption of sustainability reporting standards for certain sectors and for certain third-country undertakings.

Background

The Accounting Directive as amended by the CSRD requires large companies and listed small and medium-sized companies, as well as parent companies of large groups, to include in a dedicated section of their management report the information necessary to understand the company’s impacts on sustainability matters, and the information necessary to understand how sustainability matters affect the company’s development, performance and position.

This sustainability information must be reported in accordance with the European Sustainability Reporting Standards (ESRS), to be adopted by the European Commission (Commission) by means of delegated acts. The ESRS must specify the content and, where relevant, the structure to be used to present that information.

A first set of ESRS was adopted by the Commission on 31 July 2023 and published in the Official Journal of the EU on 22 December 2023. The ESRS in this first set are sector agnostic, meaning that they apply to all undertakings under the scope of the CSRD, regardless of which sector or sectors the undertaking operates in. Article 29b(1), third subparagraph of the Accounting Directive sets the adoption date of the sector specific ESRS by 30 June 2024. These ESRS are to specify the information that undertakings should report about sustainability matters and reporting areas specific to the sector in which an undertaking operates.

On 17 October 2023, the Commission tabled its proposal for a two-year postponement of adoption deadlines for sector-specific ESRS and ESRS for certain non-EU companies to allow more time to apply the first batch of standards and prepare for the next ones.

Main elements of the agreement

The provisional agreement on the draft directive will give more time for companies to prepare for the sectorial ESRS and for specific standards for large non-EU companies, which will be adopted in June 2026, two years later than the originally scheduled date.

Vincent Van Peteghem, Belgian Deputy Prime Minister and Minister of Finance, said:

“Boosting European competitiveness is a core pillar of the Belgian Presidency, and one way to achieve this objective is to reduce the administrative burden on companies. Today’s agreement limits reporting requirements to the minimum and gives companies time to implement the ESRS and prepare for the sectorial European Sustainability Reporting Standards”.

Next steps

The provisional agreement now needs to be endorsed and formally adopted by both institutions.

For further updates on regulatory developments in the ESG space please visit our Financial Services Regulatory Developments in ESG hub.