CSRD: Where are we today?


Alberto Bailin Co-founder of Lienzo

Image by Alex King

Reporting “flexibility”, Interoperability of standards, and French Transposition
The EU Commission announced on 17 October 2023 – when outlining their 2024 Work Programme that they want to reduce ESG reporting requirements by 25%. This decision was taken as part of its strategy for long-term competitiveness and reducing burdens associated with reporting requirements, without undermining the policy objectives of the concerned initiatives. 

So, what are the adjusted thresholds?
The CSRD dictates a company's reporting obligations based on its size or group affiliation. Typically, sizable EU companies and groups must adhere to these requirements starting from the financial years commencing on or after January 1, 2025. In contrast, specific small and medium-sized enterprises (SMEs) are expected to comply for financial years beginning on or after January 1, 2026. A comparison of the current and new thresholds is set out in the table below.

When will these adjusted thresholds apply?
These updated thresholds must be implemented by member states for financial years starting on or after January 1, 2024. Nevertheless, individual member states have the discretion to permit entities to adopt these adjusted thresholds for financial years commencing on or after January 1, 2023. The decision rests at the discretion of each member state.

Sector-specific standards

The 2024 Commission Work Programme of the European Commission also suggests an intention to delay the adoption of sector-specific ESRS and the ESRS to be used by non-EU companies in scope of the CSRD. The deadline for the Commission to adopt sector-specific ESRS by way of delegated acts under Article 29b(1), third subparagraph, is set by 30 June 2026 (instead of 30 June 2024).

Now that we have analyzed the latest updates to the CSRD at the European level, this article will continue by exploring the interoperability of reporting standards such as ESRS, GRI, and ISSB and by delving into the historic transposition of the CSRD in France.

Interoperability of Standards:
In a groundbreaking development, the European Financial Reporting Advisory Group (EFRAG) highlights the integration of International Sustainability Standards Board (ISSB) information into the recently adopted European Sustainability Reporting Standards (ESRS). This marks a significant step towards comprehensive interoperability.

Companies preparing their sustainability reports based on the complete set of European standards can now ensure compliance with ISSB requirements on climate change without excessive burden. EFRAG and ISSB are actively collaborating on an interoperability roadmap, a crucial step in enhancing the quality of climate reports. This announcement aligns with the earlier interoperability with the Global Reporting Initiative (GRI), facilitating the work of European companies and those subject to CSRD outside the EU.

French Transposition and Key Learnings:

C'est historique!
France became the first European country to transpose the CSRD, bringing about key changes in applicability, sanctions, reporting for subsidiaries, publication requirements, and audit procedures.

1️⃣ Applicability: SAS entities are now subject to CSRD, increasing the number of companies under CSRD in France from 2,500 to 6,000 and 50,000 in the European Union.

2️⃣ Sanctions: Non-compliance may result in fines, injunctions, and restrictions on public procurement.

3️⃣Subsidiaries / Parent companies: Detailed provisions for subsidiaries controlled by EU and non-EU parent companies.

4️⃣ Publication: CSRD information must be included in the management report, with exceptions for sensitive business information.

5️⃣ Audit: Sustainability information certified by accredited auditors; H3C transforms into H2A for enhanced oversight.

With the French transposition of CSRD, the audit landscape undergoes transformative changes, welcoming new auditors and ensuring robust oversight. As other EU countries have until June 2024 to follow suit, these updates signify a comprehensive framework for sustainable reporting, enhancing transparency, and standardizing practices across the European business landscape.