EU Commission amends the CSRD

• Materiality: Except for the general disclosure requirements, all companies will have to determine which standards and requirements are significant to their specific circumstances through a materiality assessment. This aims to reduce the burden on companies and ensure that the standards are proportional to their needs.
• Phase-in certain requirements: In addition to the phase-ins proposed by EFRAG, the Commission has added further phase-ins to help particularly smaller companies that are new to sustainability reporting. For example, companies with fewer than 750 employees are allowed to exclude certain data points related to greenhouse gas emissions (Scope 3), and specific disclosure requirements in their first year of applying the standards. They can also omit additional disclosure requirements in the first two years for biodiversity, value-chain workers, affected communities, consumers, and end-users. Moreover, all companies have the option to omit certain information in their first year of implementing the standards. This includes anticipated financial effects related to non-climate environmental issues like pollution, water, biodiversity, and resource use. Additionally, all companies can exclude specific data points related to their own workforce, such as social protection, persons with disabilities, work-related ill-health, and work-life balance. 
• Making certain disclosures voluntary: The Commission has changed some mandatory data points proposed by EFRAG into voluntary ones. This includes, for example, biodiversity transition plans and certain indicators related to non-employees in a company's workforce, which are now voluntary. Additionally, companies can explain why they may consider a particular sustainability topic not to be material.
• Further flexibilities in certain disclosures: The Commission offers more flexibility in disclosure requirements concerning the financial impacts of sustainability risks, engagement with stakeholders, and the methodology for materiality assessment. Modifications have also been made to data points concerning corruption, bribery, and whistle-blower protection to ensure they respect the right to not self-incriminate. 
• Coherence with EU legal framework: To ensure coherence with the EU legal framework, technical adjustments have been made to align the standards with other laws and directives, such as the Accounting Directive, the Pay Transparency Directive, and the European Pollutant Release and Transfer Register.
• Interoperability with global standard-setting initiatives: Efforts have been made to ensure interoperability with global standard-setting initiatives. The Commission and EFRAG have engaged with the IFRS’s International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) to align the European standards with global practices, resulting in further modifications to the draft standards.

An interpretation mechanism will be put in place by the Commission to provide formal interpretations of the standards. Furthermore, the Commission has asked EFRAG to publish additional guidance and educational materials, addressing the materiality assessment process and other issues.

The modifications are open for consultation until 7 July 2023. After the consultation period it is expected that this Delegated Act will be approved by the commission in July or August 2023, and then enter a scrutiny period by the European Parliament and the Council for two to four months.

Continue your journey towards CSRD-compliant reporting. The phase-in period for some of the proposed amendments is a result of smaller companies not being ready for the CSRD yet. The comprehensive regulations will come regardless. Therefore, companies should use the extra time to perform a double materiality assessment now, to identify any gaps and ensure they are able to collect, understand and manage their non-financial data.