Regulatory relief? EU postpones ESG rules for most companies
In February this year, the European Union announced the introduction of Omnibus I deregulation package to simplify regulatory requirements, including those related to sustainability issues under the CSRD. Work on specific solutions is still ongoing, but the first steps have already been taken – on 14 April, the EU Council adopted the temporary deferral directive. Among other things, it has delayed the implementation of mandatory sustainability reporting (known as ESG reporting) for the vast majority of companies.
What is to be changed?
The obligation to prepare ESG reports based on the CSRD is introduced in four waves. The first one involves the largest public interest entities, such as large listed companies and banks, which must publish their reports already this year (for 2024). The second wave applies to large companies (within the meaning of the Accounting Law), and the third wave to small and medium-sized listed entities. Finally, the reports would be prepared by subsidiaries or branches of companies from outside the European Economic Area.
The changes endorsed by the Council of the European Union apply to the second and third waves, i.e. large companies and small and medium-sized listed companies. The requirement to prepare reports for 2025 and 2026 (in 2026 and 2027, respectively) was postponed by 2 years. Consequently, these companies will not be required to publish their first ESG reports until 2028 and 2029.
Are these changes certain?
The legislative process in the European Union has been completed and the directive is awaiting publication in the EU Official Journal. It will then have to be transposed into national law, which Member States have to do until the end of this year. However, sometimes there are delays in implementing directives. We don’t expect this to be the case, as only a few amending regulations are needed to reflect these changes.
Does this mean that ESG considerations will not be of major significance at this stage?
As mentioned above, the changes in the implementation timetable for ESG reporting requirements do not apply to the first wave, which includes large banks or the largest listed companies. This means that they may still enquire about sustainability issues in the process of applying for funding or establishing business relationships.
Therefore, it is not out of the question that, in order to remain competitive in the market, it will also be necessary to plan and take measures relating to sustainability, even if the reporting requirements do not apply directly to the business in question.
Is this the end of simplifications?
The above changes are just the first stage of changes announced by the European Union to make it easier to do business in Europe. Some of the other deregulatory measures proposed at European level include
- narrowing the group of companies required to produce sustainability reports (possibly by as much as 80%),
- reducing the requirements for sustainability impact assessments within the value chain,
- liberalizing the requirements for certification of sustainability reports by auditors,
- simplifying the European Sustainability Reporting Standards (ESRS).
We are monitoring the progress and direction of the above changes and will provide an update. Should you have any questions about the above changes or ESG requirements, please contact us.
KONTAKT
E: magdalena.patryas@pl.Andersen.com
T: +48 32 731 68 84
M: +48 502 392 419
E: marcin.matyka@pl.Andersen.com
T: +48 22 690 08 60
M: +48 669 768 444
