EU Delays Sustainability Reporting Requirements for Businesses

In a significant move to balance regulatory demands with corporate readiness, the European Commission has proposed amendments to key sustainability directives—the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). These changes based on the ‘Simplification Omnibus’ aim to streamline reporting requirements and provide businesses with additional time to adapt, reflecting the Commission’s responsiveness to industry feedback and the evolving economic landscape.

Extended Deadlines and Adjusted Thresholds

Recognising the challenges businesses face in aligning their operations with stringent sustainability standards, the Commission has proposed a two-year postponement for the CSRD reporting requirements. This adjustment means that companies initially expected to report in 2026 for the 2025 financial year will now commence reporting in 2028 for the 2027 financial year. Similarly, listed small and medium-sized enterprises (SMEs) will see their reporting obligations deferred from 2027 to 2029.

In tandem with these extensions, the scope of companies required to report under the CSRD has been narrowed. The employee threshold has been raised from 250 to 1,000 employees, aligning more closely with the CSDDD criteria. Financial thresholds remain unchanged, with the directive applying to companies exceeding €50 million in net turnover or €25 million in assets. This recalibration is anticipated to reduce the number of companies under the CSRD’s purview by approximately 80%.

Simplified Due Diligence Requirements

The CSDDD has also undergone revisions to alleviate immediate pressures on companies while maintaining a commitment to addressing human rights and environmental risks within global supply chains. Notably, the frequency of mandatory supply chain evaluations has been reduced from annual assessments to once every five years. Additionally, due diligence obligations will primarily focus on direct suppliers, simplifying the compliance process for many businesses.

Implications for Businesses

While these adjustments provide companies with extended timelines and reduced reporting burdens, it remains imperative for businesses to proactively prepare for the forthcoming requirements. The delay offers a crucial window for organizations to align their operations, enhance data collection processes, and integrate sustainability considerations into their strategic planning. Early preparation will not only ensure compliance but also position companies favorably in a market that increasingly values environmental and social responsibility.​

Conclusion

The European Commission’s proposed amendments to the CSRD and CSDDD signify a thoughtful approach to regulatory implementation, balancing the need for robust sustainability reporting with the operational realities faced by businesses. By extending deadlines and refining the scope of these directives, the Commission acknowledges the complexities inherent in transitioning towards more sustainable business practices. Companies are encouraged to utilize this extended timeframe to thoroughly prepare for compliance, thereby contributing to the broader objectives of environmental stewardship and social accountability