EU Commission Warns 17 Member States Over Failure to Implement CSRD Sustainability Reporting Rules
The European Commission announced that it has sent letters to 17 EU member states, opening infringement procedures with the states over their failure to communicate that they have fully transposed the new Corporate Sustainability Reporting Directive (CSRD) into their national laws.
The CSRD is a major update to the EU’s Non-Financial Reporting Directive (NFRD), the previous EU sustainability reporting framework, significantly expanding the number of companies required to provide sustainability disclosures to over 50,000 from around 12,000. Based on new underlying European Sustainability Reporting Standards (ESRS), the CSRD introduces more detailed reporting requirements on company impacts on the environment, human rights and social standards and sustainability-related risk.
The CSRD took effect from the beginning of 2024 for large public-interest companies with over 500 employees, with the first reports to be issued in 2025, followed by companies with more than 250 employees or €40 million in revenue in the following year, and listed SMEs one year later.
The deadline for states to transpose the CSRD into national laws was July 6, 2024, yet the Commission said that it is still calling on 17 member states to transpose the directive.
The states receiving the letters include Belgium, Czechia, Germany, Estonia, Greece, Spain, Cyprus, Latvia, Luxembourg, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia and Finland.
In its statement announcing the launch of the infringement procedures, the Commission said:
“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.”
Under EU infringement procedures, the Commission may take legal action against EU member states that fail to implement EU laws, starting with a letter of formal notice. Following the letter, the Commission may send a reasoned opinion with a formal request to comply with the law, and then may refer the matter to the Court of Justice and ask the court to impose penalties.
Following the Commission’s action to send the letters, the 17 member states have two months to respond and to complete the transposition, after which the Commission may send a reasoned opinion.
In addition to calling on stated to implement the CSRD, the Commission also opened infringement procedures against 26 member states for failing to implement provisions aimed at accelerating permitting procedures for renewable energy projects under the Renewable Energy Directive. The directive mandates that renewable energy make up 42.5% of the EU’s overall energy consumption by 2030, while also directing EU member states to endeavor to collectively achieve an indicative renewable energy target of 45%. Renewable energy accounted for approximately 22% of the EU energy mix in 2021. According to the Commission, to date, only Denmark met the July 2024 deadline to communicate full transposition of the directive’s provisions.