As EU rows back on sustainability reporting, 91探花 offers support for businesses

As the European Commission proposes deregulation of sustainability reporting for around 80% of businesses previously in scope, and delays reporting requirements for two years, 91探花 offers support for businesses unsure of what this means for them. 

Changes to the Corporate Sustainability Reporting Directive (CSRD) and EU Taxonomy have caused confusion for organisations that have already made significant investments in preparation for reporting next year. 

Rich Hall, Partner at 91探花 said: “The EU has redefined what best practice looks like for businesses developing and reporting on their sustainability strategies. With four in five businesses now likely out of scope for reporting, this may send the message to some that sustainability reporting is no longer important. But for those already well underway with preparation for CSRD, EU taxonomy and others, this move is unlikely to deter them from plans to develop clear and robust strategies and reporting.”

What’s changing?

• The Corporate Sustainability Reporting Directive (CSRD)
• The Corporate Sustainability Due Diligence Directive (CSDDD)
• The EU Taxonomy
• The Carbon Border Adjustment Mechanism Regulation
• The InvestEU Regulation

CSRD thresholds and timelines

The proposed reporting threshold will increase to only include businesses with 1000 employees or more, and either a turnover of €50m or a balance sheet of over €25m. Organisations with less than 1000 staff will be out of scope, as will listed SMEs.  

A proposal to postpone reporting requirements for large companies which are not Public Interest Entities (PIEs) has also been made. This is to avoid the need to report for 2025 then stop due to a change of thresholds. It’s hoped rapid agreement will be reached on the postponement to provide legal clarity for companies that are due to report in 2026.

Non-EU headquartered organisations that generate revenue in the EU will face higher reporting thresholds. The net turnover threshold generated in the EU will rise from €150m to €450m. At least one EU subsidiary must meet the definition of a large undertaking under EU law, or at least one branch must generate over €50m net turnover. 

CSRD Assurance

Limited assurance requirements will remain, and the European Commission will issue targeted assurance guidelines by 2026 to clarify expectations. The planned reasonable assurance requirement for 2028 will be removed to limit organisations’ increases in audit costs.

Reporting standards (ESRS)

The structure and presentation of ESRS will be simplified to reduce the number of datapoints, by removing those deemed least important, prioritising quantitative datapoints over narrative, and further distinguishing between mandatory and voluntary datapoints.

Taxonomy

Companies with fewer than 1000 employees and less than €450m net turnover will report on a voluntary basis. This means businesses under this threshold, which are not claiming any eligibility or alignment, will not need to report.

Organisations subject to CSRD are also automatically required to report certain taxonomy indicators under the taxonomy regulation. Postponing the CSRD would automatically postpone the taxonomy reporting date for these companies.

Rich Hall concludes: “The CSRD has triggered stronger partnerships between companies’ finance, procurement and sustainability teams. It’s led to sustainability data infrastructures, processes and controls being better embedded in organisations, even in companies that have been reporting on sustainability for years. As the dust settles, one thing is clear: the positive changes businesses have already made are not going anywhere, and next steps should focus on finding ways to leverage these foundations to develop a significant strategic edge.”