EU delays CSRD rules for non-EU firms

The European Commission has announced a delay in the adoption of European Sustainability Reporting Standards (ESRS) for companies outside the EU, under the Corporate Sustainability Reporting Directive (CSRD). This decision is part of a broader de-prioritisation process aimed at simplifying regulations to enhance Europe’s productivity and competitiveness while reducing administrative burdens on businesses.

A letter from the Commission to the EU’s financial regulators revealed the plan, highlighting that recent regulations have empowered the Commission to adopt approximately 430 legislative measures. Of these, 115 have been identified as “non-essential” for achieving EU policy objectives, including the Delegated Act on ESRS for certain third-country undertakings.

The ESRS outlines the rules for companies to report on sustainability-related impacts, risks, and opportunities under the CSRD, effective from the beginning of 2024. The directive also mandates large non-EU companies operating within the EU to follow ESRS guidelines, with reporting initially set to begin in 2028. Adoption for non-EU companies was originally scheduled for June 2024 but has been postponed to June 2026. The Commission now states that the de-prioritised acts will not be adopted before October 2027.

This delay coincides with the Commission’s Omnibus I initiative, currently under discussion by EU lawmakers. The initiative proposes significant changes to regulations like the CSRD and the Corporate Sustainability Due Diligence Directive (CSDDD), intending to lessen the regulatory load on businesses. Proposed changes include limiting CSRD coverage to companies with over 1,000 employees, up from the current 250 employee threshold, and reducing the volume of required reporting information. Earlier this year, European lawmakers adopted a ‘stop-the-clock’ directive to delay CSRD disclosure requirements for smaller companies during the Omnibus process.

The delay also comes amid resistance from the U.S., which has objected to proposed reporting requirements for American companies under the CSRD. A recent EU-U.S. framework agreement commits the EU to ensure that the CSRD and CSDDD do not hinder transatlantic trade.

Other delayed acts include the adoption of ESRS for listed SMEs and sector-specific ESRS, although these may not be required due to the Omnibus process.