Sustainability reporting updates – October 2023

In recent days there have been a number of updates of relevance to those companies that fall within scope of the sustainability reporting obligations under the Corporate Sustainability Reporting Directive. We have set out a brief overview of each of these updates below.

1. Proposed amendments to the Accounting Directive adopted by the European Commission

On 17 October 2023, the European Commission adopted the proposal to increase the financial thresholds for companies set out in the Accounting Directive, Commission Delegated Directive (EU) [.../…] of 17.10.2023 amending Directive 2013/34/EU of the European Parliament and of the Council as regards the adjustments of the size criteria for micro, small, medium-sized and large undertakings or groups. The intention is that once in force this delegated act will increase these financial thresholds to account for inflation. By way of reminder, those “financial” thresholds are:

(i) balance sheet total

(ii) net turnover

Below is a table setting out the details of the new and existing thresholds for large, medium, small and micro companies. While this delegated act is not in force until published in the Official Journal of the EU, it will:

(i) require EU member states to implement legislation applying these provisions for financial years beginning on or after 1 January 2024

(ii) allow member states to provide companies with the ability to apply these provisions for financial years beginning on or after 1 January 2023

2. Adoption of sector specific and non-EU European Sustainability Reporting Standards to be delayed

On 17 October 2023, the European Commission also published a draft proposal for a decision of the European Parliament and of the Council amending Directive 2013/34/EU as regards the time limits for the adoption of sustainability reporting standards for certain sectors and for certain third country undertakings. This proposed decision aims to push out the date the sector specific European Sustainability Reporting Standards (ESRS) should be adopted by from 30 June 2024 to 30 June 2026. In addition, the adoption of the separate ESRS to be prepared for use for non-EU companies will also be delayed by two years. Once this decision has been published these ESRS will also need to be adopted by 30 June 2026. 

3. Vote on objection to the adoption of the ESRS

On 18 October 2023, the European Parliament voted on the objection that had been raised to the sector agnostic ESRS adopted by the European Commission in July. The rejection of this objection paves the way for these standards to be published before the end of the year.  

4. EFRAG prepares 2024 work programme

On 11 October 2023, EFRAG's sustainability reporting board approved their 2024 work programme. Key priorities for EFRAG in 2024 are to finalise measures to support the implementation of the sector agnostic ESRS and to introduce separate standards for SMEs.​

EFRAG will issue implementation guidance in 2024 with the drafts relating to the:

(i) materiality assessment

(ii) value chain to be approved by the end of 2023

Other implementation guidance will be worked on in 2024. EFRAG also intends to launch the ESRS implementation Q&A process in the coming weeks which will provide companies the opportunity to seek clarification of specific provisions of the ESRS. On a quarterly basis in 2024 EFRAG intends to publish responses as part of this process.

EFRAG has indicated that in December 2023 (or at the beginning of Q1 of 2024), the inventory in XLS of the datapoints deriving from ESRS and consistent with the future draft ESRS XBRL Taxonomy will be issued.

In terms of separate standards for SMEs, EFRAG expects to issue the initial exposure draft of the simplified standards for listed SMEs for public consultation in January 2024. EFRAG is also preparing a voluntary reporting standard for non-listed SMEs. It is anticipated that the exposure draft will be published for consultation in the Q1 of 2024. 

As noted in recent EFRAG meetings, sector specific ESRS will likely focus on the oil and gas and financial institutions sectors in 2024. A third sector specific standard and potentially a fourth sector specific standard will also be drafted in 2024, it is not clear yet which other sectors will be prioritised. As non-EU groups will not be required to report until 2029, EFRAG has indicated that the consultation in respect of separate standards will not launched until Q4 of 2024 at the earliest.

For more information in relation to these updates, please contact Jill Shaw, ESG & Sustainability Lead or visit our ESG & Sustainability hub.

Date published: 20 October 2023