Corporate Governance Institute urges businesses to prioritise CSRD compliance despite EU delays
A proposal to scale back CSRD has been tabled by the EU in an effort to simplify rules and increase competitiveness
The Corporate Sustainability Reporting Directive (CSRD), which came into force last year, is a directive by the European Union designed to standardise how European companies report on sustainability-related information. According to the EU, the directive “modernises and strengthens the rules concerning the social and environmental information that companies have to report.”
Under CSRD, the original rules meant over 50,000 organisations would be in scope, with measures applying to all large EU companies, EU-listed companies and non-EU companies generating over €150m revenue in the EU. There were also several key changes from the outgoing NFRD legislation, such as double materiality (assessing both financial and broader environmental risks), mandatory audits and digital reporting formats.
However, following backlash from a range of stakeholders to the burden of added regulatory pressure, the EU has reduced requirements on the companies impacted by CSRD with its Omnibus Simplification Proposal. Alterations include delays to original timelines, as well as greater scrutiny of larger companies and organisations with significant social or environmental impacts.
According to Ciaran Bollard, CEO and Director of the Corporate Governance Institute, businesses that mistake the watering down of CSRD with a pivot away from this legislation entirely will face long-term challenges.
Bollard said: “While Europe’s commitment to better sustainability reporting remains, it has much more work to do to get companies on board. If it doesn’t achieve this, CSRD will only ever be seen as a bureaucratic tick-box exercise that is stifling strategic goals. In reality, it’s supposed to be a careful balance between essential sustainability objectives and the practicalities of running a business.
“For European boards, this situation is a recipe for frustration. On the one hand, the scaled-back Omnibus proposal might offer some relief. On the other hand, the lingering uncertainty over what the approved framework will look like creates a strategic conundrum. Businesses need clarity to plan effectively, and the current limbo only adds to the risk.
“So, for companies that think they will be subject to CSRD regulations it’s best to move at pace, rather than increasing and decreasing priorities only upon receiving concrete information about changes. Use critical governance skills like strategic foresight, adaptability, and a proactive approach to navigate in the meantime. Following this methodology could be a win-win. Companies can cover all eventualities in the short term while potentially earning some reprieve from reporting requirements in the long term.
“CSRD won’t disappear. It’s too big a directive central to the EU’s goal of achieving greater sustainability in the next few decades. It’s the scale and the timing that will be continually debated, but ultimately organisations that align have an opportunity to enhance their reputations in the eyes of all stakeholders.
“The important thing is that the culture of transparency continues to grow. For many companies, this does mean some changes at the governance level, particularly around data collection and stakeholder engagement. Eventually, things will be ironed out, and it just might take a little longer than expected.”
Bollard concluded: “Europe’s ESG reporting rules have sparked a heated debate, exposing the friction between sustainability ambitions and economic realities. As the Omnibus Simplification Proposal awaits legislative approval, the pressure is on businesses to stay nimble and boards to step up.”
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