Italy: No extension of CSRD deadlines and reporting obligations with EFRAG standards

published on 9 February 2024 | reading time approx. 4 minutes

It has recently become news that the EU Parliament voted for a two-year extension for the adoption of ESRS reporting standards for specific sectors.

The news has often been incorrectly or confusingly reported and has mistakenly led many to believe that the entry into force of the new sustainability reporting obligations has been postponed.

It is therefore appropriate to clarify and clear the field of this misunderstanding, which can be a harbinger of serious compliance risks for companies.

“We will extend the deadline for sector-specific standards under the Corporate Sustainability Reporting Directive (CSRD) by two years to give EFRAG time to develop quality standards and give companies time to implement them,” rapporteur Axel Voss said.

Only the deadline for the implementation of sector-specific standards, therefore, has been extended. No extension regarding the entry into force of the reporting obligations in accordance with the CSRD has been accorded. But let us go in order.

CSRD

The CSRD, as it is known, introduces on a gradual basis new sustainability reporting standards for tens of thousands of companies across the EU and beyond.

The CSRD is complemented by the European Sustainability Reporting Standards (ESRS), which were developed by EFRAG on behalf of the European Commission and contain the details of the reporting requirements of the Directive.

The ESRS a-sector Standards (sector agnostic standard)

During the first phase of its mandate, EFRAG issued a-sector ESRS, which apply to all companies falling under the scope of the CSRD, regardless of the sector(s) in which the company operates.

The a-sectoral ESRS were formally adopted and came into force on 25 December 2023, following the publication of the European Commission's Delegated Regulation No. 2772 of 31 July 2023 in the Official Journal, and are now an integral part of the CSRD’s sustainability reporting rules.

These ESRS include, among other things:

general requirements (including an explanation of the concept of dual materiality, the value chain and the preparation and presentation of sustainability information);
general information (including governance, strategy and impacts, risk and opportunity management, metrics and targets);
a set of reporting standards for environmental information on climate change, pollution, water and marine resources, biodiversity and ecosystems, resources and circular economy;
a set of reporting standards for social information related to the organization's workforce, value chain workers, affected communities, customers and end users; and
a standard for reporting on business conduct.

Sectoral standards (sector specific standard)

The CSRD also provides for the adoption of specific reporting standards for the following areas:

oil and gas;
coal, quarries and mines;
road transport;
agriculture, animal husbandry and fishing;
motor vehicles;
energy production and utilities;
food and drink;
textiles, accessories, footwear and jewelry.

In the 2024 Work Programme, the Commission proposed to postpone the deadline for the adoption of the sectorial standards from 30 June 2024 to 30 June 2026, with the stated aim of providing stakeholders with the opportunity to adapt to the new reporting requirements and to give EFRAG the opportunity to develop efficient and proportionate sectorial ESRS.

Now, on 29 January 2024, the European Parliament approved the above-mentioned Commission Proposal.

Although this extension may give some breathing space to companies in the sectors concerned for which it is undoubtedly more difficult to improve ESG performance (in particular emissions and supply chain management), the absence of sector-specific reporting standards may result in a further difficulty, as companies will still have to report and will have to do so without the support of common standards and sector-specific guidelines. In all likelihood, companies in these sectors will continue to rely on existing and so far internationally acknowledged sector-specific standards such as GRI, also considering the high interoperability of GRI standards with ESRS.

Conclusions

The road map for the adjustment to the CSRD rules and their progressive entry into force remains unchanged. The standards to be used are the ESRS standards currently in force since 25 December 2023. Pending the adoption of sector-specific ESRS standards, a-specific ESRS standards should be used and other international standards should be resorted to for certain specific sectors whereas existent. In any case, the reporting shall be in accordance with the CSRD.