The European Commission has enacted new amendments to the European Sustainability Reporting Standards (ESRS), which affects sustainability reporting requirements for large companies under the Corporate Sustainability Reporting Directive (CSRD). These “quick fix” amendments were introduced to reduce the regulatory burden on companies who must comply with the CSRD, providing them with a temporary respite from new disclosure requirements. This decision reflects the ongoing revisions to the CSRD as part of the Omnibus I package, which targets easing the sustainability reporting obligations on businesses.
The past decade has seen multiple shifts in sustainability reporting in the European Union. Initially, the CSRD was set to incorporate more companies gradually, beginning with those having over 500 employees. New initiatives, like the European Financial Reporting Advisory Group’s proposals to cut reporting datapoints by two-thirds, contrast with earlier expansions of corporate sustainability responsibilities. These developments depict a shift in focus from broad inclusion to a more concentrated scope on larger businesses.
What’s Changing for Companies?
The amended rules permit postponement of additional reporting on certain sustainability impacts such as biodiversity and Scope 3 emissions, which were supposed to start in the second and third years of reporting. Companies affected include those with more than 1,000 employees, as many smaller companies may soon be excluded from the CSRD’s purview due to the new thresholds proposed within the Omnibus initiative. Under the new provisions, companies in the first reporting wave can defer some upcoming disclosures.
How Will Employee Thresholds Impact Reporting?
The European Commission has suggested raising the employee threshold for CSRD applicability from 250 to 1,000, minimizing the quantity of required disclosures. Businesses with fewer than 750 employees are now eligible to omit certain data, like Scope 3 emissions, in their sustainability reports through 2026. Meanwhile, businesses with over 750 employees are granted similar phases for most topics, except Scope 3 emissions, effectively reducing the reporting requirements.
For smaller companies, European lawmakers enacted a ‘stop-the-clock’ directive to delay CSRD implementation. This directive is anticipated to give these companies additional time to adapt to the impending regulatory shifts. The Commission has expressed hope to conclude their review of the ESRS by the financial year 2027.
The recent amendments are part of broader strategic efforts to alleviate the administrative load initially mandated by the CSRD. As companies adjust, there remains some uncertainty on how these changes will ultimately play out in practice, posing questions on the future role of sustainability reporting within the EU.
Meeting stringent sustainability criteria remains crucial for businesses. While the rapid policy shifts can introduce uncertainty, understanding these amendments can better prepare companies for future compliance. Liquidity constraints and evolving global sustainability expectations urge companies to remain agile in their reporting processes.
The key changes to the ESRS emphasize greater flexibility and leniency in the reporting mandates, affording affected companies more time to prepare for comprehensive disclosures. By postponing additional reporting requirements, EU authorities seek a balanced approach that nurtures corporate responsibility alongside economic viability.
