The European Commission looks set to ease some of the rules around corporate sustainability reporting as part of expected changes to one of its directives.
The Corporate Sustainability Reporting Directive (CSRD) came into force in 2023 and requires all large and listed companies to be more transparent about the impact of their operations environmentally, socially and with regard to human rights.
That includes the annual publication of data around a range of aspects of their business.
Around 50,000 companies across the European Union are currently within scope of the directive, though initially only the first 10,000 have had to publish reports. And coplying with the rules has proven to be a sizeable task for affected firms.
“It’s fair to say, for many companies, it’s been a challenge,” said Catherine Duggan, head of sustainability in advisory consulting at Grant Thornton . “It has been a significant undertaking, even for the ones that were advanced in sustainability. There are new requirements, new ways of looking at things.”
Tomorrow the Commission is set to publish updated rules on CSRD – however, rather than adding to the directive, it is widely expected that the changes will see its scope narrow somewhat.
“It’s likely they will look to reduce the number of companies in scope under the current system,” she said. “They have also called out that they’re trying to reduce the administrative burden on companies, so that’s definitely one thing they’ll look at”.
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“I would also expect them to look at the number of data points – at the moment there are up to about 1,200 data points a company could be expected to disclose. It’s likely the number of those data points will be reduced or made voluntary,” she added.
There is also anticipation that the commission will make changes around the deadlines firms face. At it stands a wider range of in-scope companies will be required to start reporting from next year, however Ms Duggan says that target could now slip.
All of this is being done as a way of making CSRD less of a burden on firms – especially at a time when the European Union is keen to ensure its rules are not stifling innovation in the region.
However Ms Duggan says that, while complying with the directive has proven a challenge for companies so far – it has offered them benefits too.
It’s been challenging, but I would also say rewarding,” she said. “We’ve worked with companies who have seen benefits of this, particularly in terms of identifying new risks and new opportunities that they’re exposed to.”
