We shine a light on the new proposal and briefly outline the most important new developments:
1. 80% of European companies currently falling under the CSRD will be exempted.
The application thresholds for the CSRD will be substantially adjusted. Companies with fewer than 1,000 employees will fall outside the scope of the CSRD. The financial thresholds of at least €50 million turnover or a balance sheet total of more than €25 million will remain in place.
As a result, the CSRD will only apply to the largest companies that have a specific impact on people and the environment (cfr. CS3D). A victory has also been announced for these largest companies: the EU plans to significantly reduce the number of technical reporting standards, the so-called ‘ESRS data points’. Sector-specific standards are also being scrapped.
The impact of limiting the CSRD on the EU market would already be worth €4.4 billion.
2. The reporting requirements under the CSRD for 2026 and 2027 have been put back by two years (to 2028). The deadline for transposition of the CS3D has been put back by one year to 2028.
3. There will be more protection for SMEs that do not have to report themselves, but are asked by partners (e.g. banks) to provide their ESG data. New guidelines should limit the information that can be requested from SMEs.
4. The taxonomy reporting has also been limited to the largest companies (similarly to CS3D). A financial materiality threshold has been introduced for Taxonomy reporting. The principle of DNSH (Do No Significant Harm) has been given concrete expression.
The EU itself is not suggesting this is deregulation, but rather an exercise in simplification.
Companies that will no longer be covered by the CSRD are encouraged to report – voluntarily. As such, ESG reporting should be a strategic and conscious choice for this group, for example to attract sustainable financing.
It should be noted that this European Commission proposal is not yet legislation. The proposal must be approved by the European Parliament and the Council. The adaptation of the legislation will enter into force as soon as there is further agreement at the EU level, which is also expected.
Until confirmation by the European Council, a period of uncertainty looms for European companies as to whether or not they are covered by the CSRD. Urgent action on the part of the legislator is called for.
We will of course be following this closely!
Do you have questions about your company’s ESG obligations? Don’t hesitate to contact us
