European Parliament Votes for Two-Year Extension on CSRD Sector-Specific and Non-EU Reporting Standards

In a significant development, the European Parliament's Legal Affairs Committee has approved a proposal to delay the implementation of certain elements of the Corporate Sustainability Reporting Directive (CSRD) by two years. The decision, which received a vote of 21 in favor and 2 against, will specifically affect the adoption of sector-specific sustainability disclosure standards and reporting requirements for non-EU companies.

The proposal, introduced by the European Commission in October as part of its 2024 Commission Work Programme, is designed to alleviate reporting burdens on companies. It also prioritizes the adoption of sector-specific European Sustainability Reporting Standards (ESRS), recognizing the need for tailored sustainability information across different industries.

Initially, the CSRD mandated the adoption of sector-specific ESRS by June 2024, following the implementation of sector-agnostic ESRS rules in July 2023. Furthermore, large non-EU companies operating within the EU were scheduled to adhere to these standards starting June 2024, with reporting obligations commencing in 2028.

The Commission's proposal extends these deadlines by two years. This extension is intended to allow companies more time to implement the first set of ESRS, reduce reporting burdens, and afford the European Financial Reporting Advisory Group (EFRAG) additional time to develop comprehensive standards.

Rapporteur Axel Voss commented on the decision:

“We will delay the deadline for sector-specific standards under the CSRD by two years 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.”

Following this vote, the proposal will advance to the Parliament plenary for approval, establishing the Parliament's negotiating position with the EU Council.

In conjunction with the European Parliament's recent decision, EFRAG is initiating a series of online workshops in February 2024. These workshops are crucial for collecting feedback on the draft ESRS – SEC1 Sector Classification, a key component in the development of sector-specific sustainability reporting standards under the Corporate Sustainability Reporting Directive.

EFRAG invites all stakeholders to participate in these workshops. Interested parties can join by subscribing to EFRAG's Sector-Specific Communities and selecting relevant sectors. The workshops will focus on evaluating the draft classification's adequacy, sector descriptions, and the division of economic activities into ESRS sectors.

The series of workshops, following the NACE Rev. 2-1 classification system, will cover a wide range of industries. Key sectors include Agriculture, Energy, Education, Healthcare, Real Estate, and more, spanning over several days in February. The detailed schedule lists specific sectors and their corresponding dates for the workshops can be reached through the link.

These sessions are a step towards refining the ESRS SEC 1 before its submission for approval and subsequent public consultation. EFRAG's initiative highlights its commitment to developing robust, sector-specific sustainability reporting standards, aligning with the European Commission's directive.