July 23, 2023
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A Closer Look at the Shifting Timelines in Corporate Sustainability Reporting

The Corporate Sustainability Reporting Directive (CSRD) marks a significant shift in the landscape of corporate sustainability reporting. A key component within this directive is the European Sustainability Reporting Standards (ESRS). Recently, there has been a crucial development concerning the timeline of the ESRS implementation, particularly the delay in certain standards. This blog post delves into the specifics of this delay and its implications.

The ESRS within the CSRD: A Brief Overview

Before discussing the delay, it's essential to understand the role of the ESRS in the CSRD context. Confirmed sources indicate that the ESRS has been explicitly incorporated into the CSRD, requiring companies to prepare their sustainability reports in accordance with these standards. This integration marks a substantial advancement in the transition to a sustainable EU economy, making the ESRS integral to corporate sustainability practices.

Dissecting the ESRS Delay

The delay in the ESRS concerns two specific areas: the sector-specific standards and standards for certain third-country undertakings. This delay, however, does not exempt companies from preparing a sustainability statement in line with the ESRS. The initial set of ESRS, which are sector-agnostic, are still applicable for financial years starting on or after January 1, 2024. This partial delay is a strategic decision aimed at providing organizations more time to adapt to the new reporting requirements.

Implications of the Delay

This delay, extending the initial adoption deadline to June 30, 2026, is crucial in allowing companies to focus on the first set of ESRS and gain experience in reporting under the new law. It also offers an opportunity for regulators to receive feedback, which will be instrumental in shaping the development of future standards. Importantly, this delay does not affect the overall requirement for companies to comply with the CSRD and the general ESRS, which are already in effect.

Sector-Specific Impact

For companies classified as European under the CSRD, the delay's impact is limited to the sector-specific standards. This targeted delay is significant as it allows these companies to gradually adapt to the new reporting requirements without compromising the overall objective of the CSRD.

Broader Context and Strategic Approach

The European Commission's decision to delay the adoption of specific ESRS standards is part of its strategic approach to sustainable reporting. This delay is intended to provide a balanced transition for companies, ensuring they can effectively align with the CSRD's requirements while also contributing valuable feedback for the ongoing development of the ESRS.

Conclusion: A Balanced Path Forward

The delay in the ESRS adoption, while significant, does not diminish the importance or effectiveness of the CSRD. It represents a pragmatic approach to implementing comprehensive sustainability reporting standards, ensuring that companies are not overwhelmed by the transition and are better prepared for the comprehensive reporting requirements. As the landscape of corporate sustainability reporting evolves, understanding and adapting to these changes remains crucial for companies operating within the EU.