Over 40 lawmakers in the European Parliament have submitted a motion for a resolution, urging the rejection of the recently enacted European Sustainability Reporting Standards (ESRS). They propose replacing the standards with more straightforward and less burdensome sustainability disclosure rules for companies.
The ESRS, adopted by the European Commission in July 2023, outlines the regulations for companies to report sustainability-related impacts, opportunities, and risks under the forthcoming Corporate Sustainable Reporting Directive (CSRD). The CSRD is set to come into effect in early 2024, serving as a significant update to the existing EU sustainability reporting framework, the 2014 Non-Financial Reporting Directive (NFRD). It will expand the number of companies required to provide sustainability disclosures from around 12,000 to over 50,000 and introduce more comprehensive reporting requirements on environmental impact, human rights, social standards, and sustainability-related risks.
The motion filed by the Members of the European Parliament (MEPs) argues that the ESRS introduces a significant administrative burden for companies due to its complex sustainability reporting standards. The resolution also claims that the standards lack usable Key Performance Indicators (KPIs) and will not establish measurable and comparable standards across companies.
The MEPs are calling for a new delegated act to replace the ESRS with simpler and less quantitatively demanding sustainability reporting standards. They also propose a longer implementation period for the new rules, voluntary standards for smaller businesses, and increased employee-based thresholds to determine the size category of companies subject to the requirements. The current definition of large undertakings is those with more than 500 employees, while mid-cap companies would be defined as those with up to 1,500 employees.
The outcome of this resolution and whether it garners majority support among lawmakers remains uncertain, as the EU Parliament approved the CSRD in November with a decisive 525-60 vote.
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