CSRD is coming—but the EU "waters down" reporting requirements, again
On June 9, the EU took another step in "shoving" the EU Sustainability Reporting Standards through its legislative committees and procedures, charging ahead to meet the Corporate Sustainability Reporting Directive (CSRD) and the EU Green Deal deadlines. The standards are now in a final 4-week 'public consultation' phase before the EU member states adopt them into law as of January 1, 2024.
You can view the received and published feedback of this public consultation here.
So, CSRD is coming, but the EU has had to lower its ambition after pushback from the 50,000 companies to which the new sustainability reporting requirements will apply under the directive.
EFRAG, tasked with developing the standards, had already reduced the number of disclosure requirements from 136 to 84 and the number of qualitative and quantitative data points from 2,161 to 1,144 after feedback from the market on the initial drafts. But now, the European Commission itself has made further amendments to ease the reporting burden for small and medium-sized companies, which sustainability advocates criticize as "watering down" the requirements.
The most notable amendments are:
Only the general disclosures (ESRS 2) will be mandatory; the other disclosures are subject to a materiality assessment ... done by the reporting company itself—this "self-policing" is the core of the criticism of the commission's amendments.
An extended phase-in period for small and medium-sized companies—now defined as companies with less than 750 employees—for scope 3 emissions reporting and reporting on biodiversity (ESRS E4), workers in the value chain (S2), affected communities (S3), and consumers and end users (S4).
Some other disclosures will be entirely voluntary.
The European Commission has also made changes to better align the EU Sustainability Reporting Standards with the IFRS Sustainability Disclosure Standards.
For further details, click here.
ESG Reporting Cheat Sheet
To help you make sense of the "alphabet soup" of abbreviations, groups, boards, and more, download our updated 'ESG Reporting Cheat Sheet' with the 50 must-know sustainability reporting terms.