Dive Brief:
- The European Commission initiated infringement procedures against 17 member states last week over their failure to fully incorporate the Corporate Sustainability Reporting Directive into their national laws.
- The states of Belgium, Czechia, Germany, Estonia, Greece, Spain, Cyprus, Latvia, Luxembourg, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia and Finland received notices for not fully transposing or adopting the CSRD’s accounting, transparency and audit directives. The CSRD went into effect in January 2023, with its reporting rules applicable starting January 2024.
- The formal notices were sent by the Commission as part of a bigger package addressing 26 member states who had failed to adopt five EU directives into their national legislation. The directives in question are focused on energy and environment, justice and financial stability, per a Sept. 25 release from the Commission.
Dive Insight:
The CSRD requires comprehensive and detailed disclosures from companies regarding their sustainability efforts from all companies listed on an EU-regulated market, including both EU and non-EU entities. EU subsidiaries of U.S. companies that meet certain asset, revenue and workforce thresholds will be required to report on their sustainability efforts and operations, per the directive.
The European Council adopted a directive in April that delayed sustainability reporting requirements for companies based outside the EU and firms from specific sectors by two years. Sectors that now have an extended reporting timeline include oil and gas; mining, coal and quarrying; road transport; motor vehicles; textiles; agriculture and farming; food and beverage; real estate; power production and energy utilities; and capital markets, insurance and banking. Non-EU companies and companies in these sectors will have until June 30, 2026 to comply with the CSRD.
The directive’s sustainability reporting rules apply for financial years beginning on or after Jan. 1, 2024. EU member states had until July 6, 2024 to incorporate the directive into their respective national laws. However, the Commission said the aforementioned states had “not yet communicated full transposition” of the CSRD by the deadline.
“In the absence of transposition of these new rules it will not be possible to achieve the necessary level of harmonisation of sustainability reporting in the EU, and investors will not be in a position to take into account the sustainability performance of companies when making investment decisions,” the Commission wrote in the statement announcing the infringement decisions.
Member states who received the infringement notice will have two months to respond and complete their transposition, the Commission said. Failure to provide a “satisfactory response” may prompt the Commission to issue a “reasoned opinion,” or a formal request to comply with EU law that outlines why the Commission believes a state is in violation of the law and sets a deadline for the state to comply, per the letter.
