Shifts in the CSRD: What needs to be done? (and what not)

Jenny Walther-Thoß
16. December 2024

The European Commission has made a significant adjustment to the timetable for the Corporate Sustainability Reporting Directive (CSRD). This development brings both challenges and opportunities for companies. This is particularly true for those that were not previously subject to the Non-Financial Reporting Directive (NFRD). We shed light on the details of the shift, its impact on various corporate groups and what this means for your sustainability reporting. Prepare your company optimally for the upcoming requirements.

 

Sector-specific standards

The European Commission has decided to postpone the introduction of the sector-specific European Sustainability Reporting Standards (ESRS) as part of the CSRD.

• Original deadline: 30 June 2024
• New deadline: 30 June 2026

Important: This postponement of two years only affects the publication of sector-specific reporting standards, not the general reporting obligation.

 

Staggered introduction of the CSRD

The general CSRD reporting obligations, on the other hand, are to come into force as planned. Different dates apply for different groups of companies:

• From financial year 2024: Companies that are already affected by the previous CSR reporting obligation (CSR-RUG)
• From financial year 2025: Other companies that did not previously have to report in accordance with the CSR-RUG. Specifically, this concerns companies with over 250 employees, a turnover of 50 million euros and a balance sheet total of 25 million euros.
  • Discussions about a postponement for a year are currently in full swing here.
• From 2026: Small and medium-sized enterprises (SMEs)
• From 2028: Third-country companies with domestic subsidiaries or branches

There are exceptions and opt-out options for:

• Micro-enterprises: They are excluded from the application,
• Capital market-oriented SMEs: They can pull a time-limited opt-out joker and benefit from a two-year transition period. First-time application is therefore possible for these companies for financial years beginning on 1 January 2028.

However, you should also be aware that there is an indirect effect for almost all companies, as reporting must be carried out for the company’s value chain. As a supplier, for example, you are “caught up” and will be required by your customer to provide certain data.

 

Challenges for non-NFRD companies

Implementing the CSRD reporting obligation is a major challenge for many companies. This is particularly true for those that were not previously subject to the Non-Financial Reporting Directive (NFRD). Depending on the categorisation in the staggered introduction mentioned above, the following applies:

1. Non-NFRD companies must prepare a full CSRD sustainability report for the first time for the 2025 financial year.
2. The minimum requirements for this report are
   1. a CSRD-compliant materiality analysis,
   2. a THG inventory,
   3. climate targets,
   4. a transformation plan and
   5. an analysis of climate risks and scenarios.

The costs for preparation and review can amount to several hundred thousand euros, which represents a considerable financial burden.

 

Possible shift for non-NFRD?

There have been and continue to be delays in the implementation of the CSRD timetable at both European and German level. This makes it more difficult for companies to prepare and could be an argument in favour of postponing the reporting obligation for non-NFRD companies. In addition, there is currently much discussion about reducing bureaucracy and reporting obligations.

It is therefore possible that the reporting obligations for non-NFRD companies, which have to report from 2026, will be adjusted again in 2025.

This can be achieved, for example, by

• simplified standards such as the European Sustainability Reporting Standard for listed SMEs (LSME ESRS) or the Voluntary reporting standard for SMEs (VSME ESRS2) or through the
• revision of current size criteria (e.g. 50 million euros turnover). This would lead to a reduction in the number of companies subject to reporting requirements. It is also possible to
• postpone the time frame by one year to the 2026 financial year.

 

Classification and consequences

Postponing the reporting obligation by one year for non-NFRD companies could be a sensible option to allow more time for preparation. It would be important for representatives of SMEs and politicians to campaign for practicable solutions. This would have to happen soon and in an organised manner (not like the current EUDR chaos).

In the long term, sustainability reporting will continue to gain in importance, also globally (see article in the Sustainability section). For this reason, despite the current challenges, companies should see CSRD as an opportunity to improve their sustainability performance and communicate it more transparently.

A gradual adjustment of the requirements and possibly a transition phase could help to make implementation more practicable for companies. It is important that companies see these reporting obligations not just as a “paper exercise”, but as a tool for intensively analysing their opportunities and risks in a rapidly changing world.

 

Conclusion

• The already announced postponement of the sector-specific ESRS by two years offers the companies concerned an extended period to concentrate on basic reporting.
• A possible postponement of the general reporting obligation for companies not subject to the NFRD by one year offers a good opportunity to prepare thoroughly for the new sustainability reporting requirements. The deadline can be used as an opportunity to establish structures and necessary tools within the company.
• The additional time should by no means be seen as a reason for delay or inactivity. On the contrary, it is advisable to use this period intensively to internalise the existing general ESRS and establish robust reporting structures.

 

Concrete steps

Companies should use the time to:

1. optimise internal processes for data collection and analysis and drive forward digitalisation,
2. train employees on sustainability issues,
3. develop or refine sustainability strategies and understand them as part of the overall business strategy,
4. discuss opportunity and risk analyses in depth within the company to derive a benefit for the company from the consideration of sustainability issues and
5. create test pilot reports to determine where data is available in the organisation and where gaps need to be filled.

 

Recommendation

By being proactive, companies can not only ensure compliance with future regulations, but also gain a competitive advantage and take the step towards merging sustainability and business. The shift offers a unique opportunity to prepare thoroughly – use this time wisely to make your organisation enforceable and ready for the future.