EU CSRD: Attempt by European Parliament to block first set of ESRS fails

The European Commission adopted the first set of (sector agnostic) European Sustainability Reporting Standards Delegated Act (ESRS) under the Corporate Sustainability Reporting Directive (CSRD) on 31 July 2023 (see our previous blog post). 

The Delegated Act containing the ESRS is now being scrutinised by the European Parliament and the Council. That scrutiny period is set to end on 21 October, unless extended by an additional two months if either the Parliament or Council request it. If either the Parliament or Council objects to the Delegated Act within the prescribed period, the Delegated Act cannot enter into force. 

On 11 October, a motion for a Resolution objecting to the ESRS was tabled by some Members of the European Parliament (MEPs) in the EPP and Renew political groups. The resolution called on the Commission to review the Delegated Act to:

• reduce the complexity of sustainability reporting standards by introducing predefined quantitative KPIs;
• reduce the quantity of the sustainability reporting standards;
• extend the implementation for all companies and introduce voluntary, quantitative, measurable and comparable SME standards; and 
• amend the balance sheet and net turnover thresholds to account inflation and amend employment figures.

A second motion for a Resolution was also tabled by MEPs in the ID group shortly afterwards. 

However, in a plenary vote on 18 October, the European Parliament rejected both motions, which means that the Parliament has currently not objected to the ESRS. Our understanding is that the Council is not planning to object to the ESRS. 

The attempt to block the ESRS by some elements of the European Parliament is, in our view, politically motived as centre-right politicians attempt to position themselves as pro-business ahead of the 2024 European elections. For more insight on this, see our commentary in the following article: Politics Obstruct CSRD, CSDDD Progress – ESG Investor.

Next steps

Provided neither the Parliament nor the Council ask for the scrutiny period to be extended (which we think is unlikely), the Delegated Act containing the ESRS should be published in the Official Journal of the EU shortly after 21 October when the current scrutiny period ends. 

The ESRS will then apply from 1 January 2024, for financial years beginning on or after 1 January 2024.

Related CSRD developments this week 

The Commission announced back in March 2023 its intention to reduce the reporting burden on companies by 25%. This initiative is intended to be cross-sectoral so it is not limited to sustainability or ESG reporting requirements. Since then, a number of pieces of legislation have been adopted already and a several additional proposals were included in the Commission Work Programme 2024 published on 17 October. 

Two of those proposals have a direct impact on the CSRD:

• The Commission has adopted a Delegated Directive amending the Accounting Directive to adjust the monetary size criteria (balance sheet and net turnover) for micro, small, medium-sized and large companies by 25% to account for inflation, which will affect those in scope of the CSRD (see our blog post). 
• The Commission has published a proposal to delay by two years the adoption of the next batch of ESRS under the CSRD – i.e. the sector-specific ESRS and the ESRS to be used by certain non-EU companies that operate in the EU (see our blog post).

For more information on the ESRS and the CSRD, see our CSRD Demystified materials.