Deadlines extended by two years for the new non-financial reporting rules
More time to adapt to European rules on sustainability reporting.
This is foreseen by an agreement reached between the Council and Parliament on some sectors that will be able to better prepare for the European sectoral sustainability reporting standards (ESRS) envisaged by the CSRD (Corporate Sustainability Reporting Directive). The postponement is also granted for the application of specific standards for large non-EU companies, which will be adopted in June 2026, two years later than originally planned.
The postponement will also give the Commission more time to develop specific sustainability standards for each sector and for specific third-country companies. The agreement requires the Commission to publish eight sectoral reporting standards, before the new deadline of June 30, 2026.
The main elements of the agreement
More closely, the provisional agreement between the Council and the European Parliament has changed the legal nature of the text, which changes from a Commission decision to a directive. Furthermore, it is suggested that the Commission publish eight industry reporting standards as soon as they are ready, before the new deadline of June 30, 2026. It is important to note that Member States will not have to transpose this directiveas the amendments concern the power to adopt delegated acts granted to the Commission.
In other words, the Commission will have the power to make specific decisions without requiring approval or direct implementation by member states. This flexible approach allows us to better adapt to the needs and specificities of each country, while maintaining the common goal of promoting corporate sustainability and responsibility.
The provisional agreement will have to be approved and formally adopted by both institutions to become definitive.
What is the CSRD Directive
The main objective of the CSRD is to improve sustainability reporting. Making a recap by points:
– Equates the relevance of ESG results with those reported in the traditional statutory financial statements;
– Recognizes the natural connection between financial and non-financial aspects.
It is estimated that the companies involved in the preparation of sustainability reporting will go from 11,700 in the Non-Financial Reporting Directive (Nfrd) to approximately 50,000 in the EU, of which 4,000 in Italy alone.
The companies involved are listed and unlisted companies which, at the balance sheet date, have exceeded at least two of the following size criteria:
– 250 as the average number of employees (which is calculated considering the average daily number of employees during the financial year);
– €20 million balance sheet;
– €40 million in net revenues.
Companies must provide detailed information regarding their impact on the environment, respect for human rights and social standards. They will also be subject to rigorous independent checks and certifications to ensure the reliability of the data provided.
The sustainability declaration will become a pillar equal to the financial one, offering investors comparable and reliable data.
The CSRD also promotes the consistency between financial and non-financial information: this will allow organizations to monitor KPIs and set ambitious objectives to reduce ESG impacts.
What did the Commission’s proposal include?
The directive requires listed companies to disclose information on risks and opportunities arising from social and environmental issues to help investors, civil society, consumers and other interested parties assess the sustainability of their activities. On 31 July 2023, the Commission adopted the first standards and cross-cutting rules for all sustainability topics to facilitate such reporting.
Recently, the GRI published new standards to make the impact that companies have on the economy, the environment and people even more transparent.
After the adoption of the directive, the European institutions should have published the new sector-specific standards, the standards for SMEs and those for third-country companies with a turnover of 150 million euros in the Union and which have at least one branch in Europe. Standards that were initially scheduled for 30 June 2024 and which the agreement between the Council and Parliament moved to 30 June 2026. The date of application for third-country companies will remain the financial year 2028, as established by the CSRD.