A group of more than 40 lawmakers in the European Parliament filed a motion for a resolution on Thursday calling for the rejection of the recently passed European Sustainability Reporting Standards (ESRS), and for replacing the standards with simpler, less burdensome and less expansive sustainability disclosure rules for companies.
The resolution follows the adoption of the ESRS by the European Commission in July 2023. The ESRS sets out the rules and requirements for companies to report on sustainability-related impacts, opportunities and risks under the EU’s upcoming Corporate Sustainable Reporting Directive (CSRD).
The CSRD, on track to begin applying from the beginning of 2024, is aimed as a major update to the 2014 Non-Financial Reporting Directive (NFRD), the current EU sustainability reporting framework. The new rules will significantly expand the number of companies required to provide sustainability disclosures to over 50,000 from around 12,000 currently, and introduce more detailed reporting requirements on company impacts on the environment, human rights and social standards and sustainability-related risk.
Once adopted by the Commission, the ESRS delegated act cannot be amended, though the EU Council and Parliament can still technically reject the act.
The motion filed by the MEPs argues that the ESRS “introduces a high administrative burden for companies due to the high complexity of sustainability reporting standards,” and will overly burden companies, particularly smaller enterprises. The resolution also states that the standards “fall short of usable Key Performance Indicators (KPIs),” which will fail to create measurable and comparable standards across companies.
The MEPs subsequently call for a new delegated act to replace the ESRS, with less complex and quantitatively reduced sustainability reporting standards. The resolution also calls for a longer implementation period for the new rules, voluntary standards for smaller businesses, as well as to increase the employee-based thresholds to determine the size category of companies for applicability of the requirements, with mid-cap companies defined as those with up to 1,500 employees. The current law defines large undertakings as those with more than 500 employees.
It remains unclear if the resolution has a chance of attracting a majority of lawmakers to its side. The EU Parliament approved the CSRD in November in a 525-60 vote.