Explanatory Memorandum to COM(2023)596 - Amendment of 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 - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2023)596 - Amendment of Directive 2013/34/EU as regards the time limits for the adoption of sustainability reporting standards for ... |
|---|---|
| source | COM(2023)596  |
| date | 17-10-2023 |
•Reasons for and objectives of the proposal
In its Communication on ‘Long-term competitiveness of the EU: looking beyond 2030’, the Commission has stressed the importance of a regulatory system that ensures that objectives are reached at minimum costs. It has committed therefore to a fresh push to rationalise and simplify reporting requirements, with the ultimate aim to reduce such burdens by 25%, without undermining the related policy objectives.
Reporting requirements play a key role in ensuring correct enforcement and proper monitoring of legislation. Their costs are overall largely offset by the benefit they bring, in particular in monitoring and ensuring compliance with key policy measures. Reporting requirements can however also impose disproportionate burdens on stakeholders, particularly affecting SMEs and micro-companies. Companies therefore should be given sufficient time to prepare for any new reporting requirements. The cumulation of reporting requirements over time can result in redundant, duplicating or obsolete obligations, inefficient frequency and timing, or inadequate methods of collection.
Streamlining reporting obligations and reducing administrative burdens is therefore a priority. In this context, the proposal will rationalise reporting obligations by postponing the adoption deadline for sustainability reporting standards for certain sectors and for certain third country undertakings.
The Accounting Directive (2013/34/EU) 1 as amended by the Corporate Sustainability Reporting Directive (CSRD - 2022/2464) 2 requires large companies and listed small and medium-sized companies (SMEs), as well as parent companies of large groups, to include in a dedicated section of their management report the information necessary to understand the company’s impacts on sustainability matters, and the information necessary to understand how sustainability matters affect the company’s development, performance and position. 3
This sustainability information must be reported in accordance with European Sustainability Reporting Standards (ESRS), to be adopted by the Commission by means of delegated acts, taking into consideration the technical advice provided by EFRAG 4 . These ESRS must specify the content and, where relevant, the structure to be used to present that information. 5
A first set of ESRS was adopted by the Commission on 31 July 2023 and is now subject to the scrutiny of the European Parliament and of the Council. The ESRS in this first set are sector-agnostic, meaning that they apply to all undertakings under the scope of the CSRD, regardless of which sector or sectors the undertaking operates in.
Article 29b i, third subparagraph, of the Accounting Directive sets the adoption date of the sector specific ESRS by 30 June 2024. These ESRS are to specify the information that undertakings should report about sustainability matters and reporting areas specific to the sector in which an undertaking operates.
The Commission is putting forward concrete proposals to reduce the reporting burden for financial market participants. One of them is to propose a 2-year delay of the date of adoption of the sector-specific ESRS, currently required in 2024. This also responds to a demand from the corporate sector.
Postponing the adoption date by 2 years is relevant for companies in the scope of the CSRD, including listed SMEs, required to carry out sustainability reporting. This will allow these companies to focus on the implementation of the first set of ESRS adopted on 31 July 2023, ensure that EFRAG has time to develop sector specific ESRS that are efficient, and limit the reporting requirements to the minimum necessary.
In addition, Article 40b of the Accounting Directive sets the adoption date for the ESRS to be used by certain non-EU companies with business in the Union by 30 June 2024. Considering that the reporting requirements for these non-EU companies only applies from financial year 2028, and considering the 2-year postponement of the deadline for adopting the sector-specific ESRS, the adoption deadline for these standards should also be postponed by 2 years. This will allow more resources to be dedicated to the development of effective and proportionate sector-specific ESRS, while still giving enough time for these non-EU companies to prepare ahead of financial year 2028.
•Consistency with existing policy provisions in the policy area
The proposal is part of a first package of measures to rationalise reporting requirements. This is a step in a process looking comprehensively at existing reporting requirements, with a view to assess their continued relevance and to make them more efficient. The rationalisation introduced by this measure will not negatively affect the achievement of the objectives in the area of sustainability reporting. The proposal is also consistent with the SME Relief Package. 6
•Consistency with other Union policies
•Legal basis
Article 50 TFEU has been determined to be the appropriate legal basis for this initiative since it amends an existing Directive, which is based on that Article.
•Subsidiarity
The deadlines for the adoption of the sustainability reporting standards are to be met by the Commission. Postponing these deadlines can only be done by way of an act of the co-legislators. No action at national level is required in this regard.
•Proportionality
This initiative has the primary objective of allowing companies to focus on the implementation of the first set of ESRS adopted on 31 July 2023, ensure that EFRAG has time to develop sectoral ESRS that are efficient, and limit the reporting requirements to the minimum necessary. Postponing the deadlines for the adoption by the Commission of the sustainability reporting standards for certain sectors - as well as for certain third-country companies - would achieve this objective while leaving sufficient time for companies to prepare for these additional reporting requirements.
•Choice of the instrument
Considering that the amendments only concern the postponement of time limits for the Commission to adopt delegated acts, therefore not requiring any transposition by the Member States, a Decision of the European Parliament and of the Council adopted in compliance with the procedure set out in Article 50 i TFEU is deemed to be the most appropriate legal instrument. Indeed, this instrument is about the overall normative context within which Member States are called to approximate their laws through the Directive, as required by Article 50 TFEU.
•Ex-post evaluations/fitness checks of existing legislation
•Stakeholder consultations
•Collection and use of expertise
•Impact assessment
•Regulatory fitness and simplification
•Fundamental rights