In a strategic move, the European Commission has recently put forth a proposal to extend the deadline for the adoption of sustainability reporting standards by a substantial two-year period. This extension is primarily aimed at certain sectors and third-country undertakings, offering them more time for a smoother transition. The Commission's intent behind this proposal is clear – it seeks to enable these undertakings to first focus on implementing sustainability reporting requirements as outlined in the Delegated Regulation. This, in turn, should help alleviate the reporting burden on them.

The amendments to Directive 2013/34/EU

The proposed decision entails a revision of Directive 2013/34/EU, which mandates specific undertakings to disclose non-financial information. The key amendment, at the heart of this proposal, is the postponement of the deadline for the adoption of delegated acts containing complementary sustainability reporting requirements. The initial deadline of June 30, 2024, will now be extended to June 30, 2026. Furthermore, the deadline for the adoption of sustainability reporting standards, pertaining to the disclosure of sustainability information for certain third-country undertakings, will also be deferred to June 30, 2026, from the original date of June 30, 2024.

It's important to note that the proposed decision is still undergoing review by the European Parliament and the Council of the European Union. The finalization and adoption of this proposal are anticipated to occur in early 2024.

Implications for Businesses

The extension of the deadline for adopting sustainability reporting standards carries significant implications for businesses. While it provides them with more time to prepare for the forthcoming requirements, businesses must not overlook the fact that these requirements will eventually come into effect. Therefore, it is crucial for them to initiate preparations now.

Review and Improvement

To get started, businesses should review their existing sustainability reporting practices. This review should identify areas in need of improvement, ensuring that the impending standards can be met effectively. Additionally, they should acquaint themselves with the proposed sustainability reporting standards, which are slated for publication in early 2024.

Implementation Plan

Once these new standards are released, businesses should develop a comprehensive plan for their implementation. This plan should encompass the identification of data that needs to be collected, the establishment of systems for data collection and analysis, and the preparation of reports in alignment with the new standards.

Broader Applicability

One significant shift brought about by the new sustainability reporting requirements is their expanded reach. Unlike the current requirements, the upcoming standards will apply to a broader spectrum of businesses, including all listed companies, irrespective of their size.

Takeaway

At the core of this proposal lies the Commission's aim to delay the adoption date for sector-specific ESRS by two years.

Under the original CSRD framework, large non-EU companies operating within the EU were obligated to provide sustainability reporting, with ESRS adoption rules set to take effect by the end of June 2024, and reporting requirements commencing in 2028. The Commission's fresh proposal recommends a two-year extension for the adoption of these rules, offering businesses more time to align with the impending changes.

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