CSRD Update Radar: all European Commission announcements

With our CSRD Update Radar, you’ll never miss a beat in the continuously unfolding story of the EU’s Corporate Sustainability Reporting Directive. While you can find all European Commission announcements regarding the directive below, you can read up on the specific requirements and reporting standards in our CSRD guide.

Need a helping hand to make sure you report correctly and reap all the CSRD’s benefits at the same time? We’re here for you.

23 October 2023 – the scrutiny period for the adoption of the ESRS has ended

In the last few days, the scrutiny period for the adoption of the ESRS has ended. The European Parliament has voted on some key amendments, Which we have summarized in 3 points:

Formal approval of the ESRS:

• The complete set of ESRS standards has been formally approved by the European Parliament. This includes the Phased-in requirements as proposed by the European Commission, which you can read about here.

Inflation-Adjusted Thresholds:

• Companies that are deemed a 'Large Undertaking' need to start reporting in 2026 (for the year 2025). The criteria to be called 'Large' were: >250 employees, >40M€ in Net Turnover and >20M€ on the Balance Sheet (2 out of 3 criteria need to be satisfied). In order to account for inflation, the EP has approved the amendment that changes this to: >250 employees, >50M€ in Net Turnover and >25M€ on the Balance Sheet.
• In a similar fashion, the criteria for SMEs are now >10M€ in Net Turnover and >5M€ on the Balance Sheet.
• The criteria for non-EU parent companies has not changed.

Minor delay in other ESRS standards:

• The creation of draft ESRS standards for both SMEs (listed and voluntary) ESRS and sector-specific ESRS has been delayed with 2 years.
• Critically, there is no delay in the actual adoption and obligation to report for these groups.
• However, this will reduce the preparation time for both SMEs and companies that need to fulfill sector-specific requirements. Futureproofed will of course keep track of any drafts available in order to inform our clients as much and as early as possible.

31 July 2023 – EU Adopts European Sustainability Reporting Standards

As of July 31, 2023, the European Commission has adopted the first set of the European Sustainability Reporting Standards (ESRS). These make it easier for organizations to report on their sustainability efforts in a structured, uniform way.

This first set consists of two generic standards and ten topical standards. The latter cover a range of environmental, social and governance factors:

• Environmental (ESRS E1-5): climate change, pollution, water and marine resources, biodiversity and ecosystems, resource use, and circular economy.
• Social (ESRS S1-4): own workforce, workers in the value chain, affected communities, consumers, and end users.
• Governance (ESRS G1): business conduct. Examples include business ethics, corporate culture, partner management and relationships, risk management, anti-corruption attitude, etc.

Compared to the original draft, the European Commission has made some modifications. For example, companies will enjoy more flexibility in determining which topics they find relevant (“material”) for their sustainability reports. Including ESRS E1 (Climate Change) and S1 (Own Workforce) is no longer mandatory, for your selection of topics will depend on the outcome of your materiality assessment.

Some Datapoints have been made optional as well. Finally, the new reporting requirements will be phased in over time. For instance, listed SMEs may choose to opt out until the financial year 2028. Moreover, organizations with fewer than 750 employees do not have to report on specific datapoints during the first or second year:

• Datapoints with a 1-year phase-in (< 750 employees): own workforce (ESRS S1) and scope 3 greenhouse gas emissions (ESRS E1-6).
• Datapoints with a 2-year phase-in (< 750 employees): biodiversity (ESRS E4), value chain workers (ESRS S2), affected communities (ESRS S3), and consumers and end users (ESRS S4).
• Datapoints with a 1-year phase for ALL companies: anticipated financial effects of pollution, water and marine resources, biodiversity and ecosystems, resource use and circular economy (ESRS E2-5); and some social indicators, such as disability, social protection, family leave policies, etc.

Sounds complicated? It doesn’t have to be. Here at Futureproofed, we can help you define which datapoints and standards are relevant for your company, and how to report on them. Contact us today, so your CSRD journey will be a smooth one.