Less red tape

The Commission proposal aims to rationalise reporting obligations for companies by postponing the adoption deadline for sector-specific sustainability reporting standards for two years until June 2026. Sector-specific European Sustainability Reporting Standards (ESRS) should clarify what exactly and to what detail should companies in particular sectors disclose about their impact on people and the planet, including on decarbonisation, biodiversity or human rights since methods and impacts differ depending on the sector. Moreover, since reporting obligations for non-EU companies with turnover above 150 million euro and their branches in the EU with turnover above 40 million euro will only start to apply in 2028, the Commission also proposes to delay adoption of the sustainability reporting standards for third country companies until 2026. This delay should enable the companies to focus on the implementation of the first set of general ESRS adopted on 31 July 2023.

Publish standards in eight areas as soon as ready

However, MEPs believe that sector-specific sustainability standards enable comparisons between companies and are therefore valuable source of information for investors.

That is why although they agree with the delay, they also suggest that the Commission publishes eight sector-specific reporting standards as soon as they are ready before the deadline. They also want to improve the transparency and flexibility of the process and request the Commission to consult the Parliament on the progress with development of the sustainability reporting standards at least once a year and on related planning, prioritisation and timeline adopted in this context by the responsible institution – European Financial Reporting Advisory Group (EFRAG).

Following the committee vote, rapporteur Axel Voss (EPP, DE) said: “We will delay the deadline for sector specific standards under the Corporate Sustainability Reporting Directive (CSRD) by two years in order to give EFRAG the time to develop quality standards and give companies the time to put them into practice. Companies have been putting up with too much bureaucracy in years of crisis, from Covid to inflation.”

Next steps

MEPs of the Legal Affairs Committee approved draft report on time limits for sustainability reporting standards for certain sectors and third-country companies with 21 votes for, 2 against and no abstentions. Following the plenary approval, the European Parliament will be ready to start negotiations about the final shape of the legislation with EU governments.

Background

While reporting requirements play a key role in ensuring correct enforcement of legislation, they can also impose unnecessary administrative burden on companies. In its communication on ‘Long-term competitiveness of the EU: looking beyond 2030’, the Commission has stressed the importance of a regulatory system that ensures that objectives are reached at minimum costs. The Commission therefore aims to reduce the administrative burden for companies by 25%.