European parliament votes to retain reporting standards for EU listed companies
With a narrower majority than expected, the European Parliament has chosen to uphold the European Sustainability Reporting Standards (ESRS), safeguarding them from potentially being scrapped this week. The vote witnessed 359 parliamentary members rallying against the removal of the standards, while 261 supported the motion that has sought to delay or withdraw the ESRS.
The ESRS are fundamental to the Corporate Sustainability Reporting Directive (CSRD) and will eventually be binding for all large companies as well as listed SMEs across the European Union. This regulation will require firms to disclose their social, environmental and governance risks, opportunities, and impacts.
Scheduled to come into effect in 2024, with the first reporting requirements initially due in 2025 from large corporates already reporting under the predecessor Non-Financial Reporting Directive, the ESRS have faced stronger than expected opposition, primarily related to fears regarding respondent burden. Reporting obligations will come into effect for a significant number of smaller, but still important companies over the course of the rest of this decade.
In response to concerns, the European Commission amended requirements earlier this year, changing some reporting obligations from mandatory to voluntary and introducing a phased-in approach to reporting requirements concerning biodiversity and various social concerns. This week it also confirmed that the thresholds for SMEs covered by the directive will be raised. Taking into account inflation sees the thresholds increase by some 25%. It appears that this will overall reduce the number of companies eventually obliged to report under the CSRD by somewhere between 10% and 20%, for now. (Hat Tip – Andie Wood)