EU member states in the European Council announced that they have approved a directive delaying the adoption of standards for companies to provide sector-specific sustainability disclosures and for sustainability reporting from companies outside of the EU under the Corporate Sustainability Reporting Directive (CSRD).

The announcement by the EU Council marks the final decision-making step in the adoption of the postponement of the sector-specific and third country undertaking European Sustainability Reporting Standards (ESRS), following the approval of the directive earlier this month by the European Parliament.

The ESRS sets out the rules and requirements for companies to report on sustainability-related impacts, opportunities and risks under the EU’s CSRD, which began applying from the beginning of 2024.

The delay was initially proposed by the EU Commission in October as part of its 2024 Commission Work Programme, which included reducing reporting burdens for companies as one of its priorities, and highlighted the postponement of the deadline for the adoption of sector-specific European Sustainability Reporting Standards (ESRS) as one of the key actions listed.

According to the Council, the delay will allow companies to focus on the implementation of the first set of ESRS, limiting reporting requirements for companies to a necessary minimum, in addition to providing more time for the development of the sector-specific and non-EU companies reporting standards.

The first set of ESRS rules, which were adopted by the Commission in July 2023, set out sector-agnostic sustainability reporting requirements, while the CSRD subsequently required the adoption of sector-specific ESRS by the end of June 2024, outlining sustainability information for companies to report relating to the industries in which they operate.

The CSRD also included a requirement for large non-EU companies that operate in the EU to provide sustainability reporting, with ESRS adoption of rules applying to these businesses also initially scheduled for the end of June 2024, and with reporting requirements to begin in 2028.

Under the newly adopted directive, the new date for the adoption of the ESRS for non-EU companies will be postponed to the end of June 2026, with the 2028 reporting obligations also delayed by 2 years to 2030.

While the deadline for specific sector ESRS will also be delayed for 2 years, in the agreement between the EU Council and Parliament on the new directive, the lawmakers urged the Commission to publish and adopt the sector reporting standards as soon as they are ready before the new 2026 deadline.