On 21 April 2021, the European Commission presented its proposal for a Directive on corporate sustainability reporting (CSRD). The proposal aims to fill the gaps in the existing rules on the reporting of non-financial information introduced by the Non-Financial Reporting Directive (NFRD). The proposal would extend the scope of the rules and would require the assurance of reported information.
This proposal comes after the Council of the European Union published a ‘general approach’ on the CSRD in which it proposed changes based on input from the Member States. The main changes to the proposed CSRD help clarify certain requirements, for example they explain how sustainability reporting requirements apply to banks and insurance companies.
The general consensus was that the reporting requirements for SMEs (small and medium-sized enterprises) were too burdensome. The general approach gives SMEs the possibility to limit the information to be provided. Note that this does not apply to SMEs which are also parent companies of large undertakings.
However, the most relevant change for companies is the fact that the Council proposed that the CSRD deadlines are pushed back. Many of the Member States considered the deadlines to be too ambitious. So, bearing this in mind, the Council proposed the following deadlines:
● transposition by Member States: 18 months after entry into force;
● implementation by undertakings:
- 1 January 2024 for undertakings already subject to the NFRD (reporting in 2025 on 2024 data);
- 1 January 2025 for large undertakings not currently subject to the NFRD (reporting in 2026 on 2025 data);
- 1 January 2026 for listed SMEs, as well as for small and non-complex credit institutions and for captive insurance undertakings (reporting in 2027 on 2026 data).
The general approach completes the Council’s negotiating position. The next step will be for the Member States to negotiate with the European Parliament, with a view to reaching an agreement on the Directive at first reading. Negotiations are expected to start in spring 2022.
It is conceivable that this timeline extension will also impact the timeline of the Corporate Sustainability Due Diligence Directive, the proposal for which was published on 23 February 2022.
Even with the delay, the timeframe is still rather ambitious, so time is of the essence. The implications of the Directive are far-reaching, even for companies that have already embraced non-financial reporting.
If you’d like to discuss this topic further, don’t hesitate to get in touch.
