The European Commission has started infringement procedures against 17 EU member states for failing to fully integrate the Corporate Sustainability Reporting Directive (CSRD) into their national legislation. This step highlights the Commission’s concerns about achieving the “necessary level” of harmonization in sustainability reporting across the EU.

Key Points:

  • Countries Involved: Belgium, Czechia, Germany, Estonia, Greece, Spain, Cyprus, Latvia, Luxembourg, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia, and Finland received formal notices for not fully adopting the directive’s requirements on accounting, transparency, and auditing.
  • Directive Timeline: The CSRD became effective in January 2023, with its reporting obligations starting in January 2024. EU member states had until July 6, 2024, to incorporate the directive into their laws.
  • Infringement Package: The CSRD non-compliance was part of a broader infringement package addressing 26 EU member states for failing to adopt five directives related to energy, environment, justice, and financial stability.

Scope and Implications of the CSRD:

The CSRD mandates detailed sustainability disclosures from all companies listed on EU-regulated markets, including subsidiaries of non-EU companies meeting specified asset, revenue, and workforce thresholds. Reporting aims to provide transparency and help investors assess sustainability performance in decision-making.

An April 2023 amendment by the European Council postponed sustainability reporting requirements for certain non-EU firms and sector-specific companies by two years. Sectors benefiting from the delay include oil and gas, mining, transport, textiles, agriculture, food, real estate, and financial services, which now have until June 30, 2026, to comply.

Commission’s Concerns:

The Commission expressed that the lack of full transposition undermines harmonization and transparency goals, limiting investors’ ability to evaluate companies' sustainability performance.

Next Steps for Non-Compliant States:

Member states issued with infringement notices have two months to respond and complete the required legal transposition. Failure to provide an adequate response could result in the Commission issuing a formal "reasoned opinion" outlining the violation and setting a compliance deadline.

This development underscores the EU’s commitment to ensuring uniform application of sustainability reporting standards, which are critical for advancing the European Green Deal's goals and fostering accountability in corporate environmental, social, and governance (ESG) practices.

Source: ESG Dive European_Commission_warns_member_states October 2024