The European Green Deal is facing some turbulence. As the cornerstone of the European Union’s non-financial transparency strategy, the CSRD (Corporate Sustainability Reporting Directive) represents one of the world’s most ambitious sustainability regulations. However, faced with the complexity of implementation and a challenging economic climate, Brussels has recently made a strategic shift toward regulatory relief.
Summary
The CSRD’s regulatory relief marks the end of the idealistic phase and the beginning of the phase of industrial realism. By raising thresholds and adjusting sector-specific standards, Europe is attempting to preserve what matters most: companies’ commitment to the transition.
For business leaders, the message is clear: the climb is less steep, but the summit remains the same. This regulatory reprieve must be used to transform compliance requirements into a driver of performance by investing in robust data systems and truly integrating sustainability into the business model. The CSRD is being scaled back, but the climate emergency knows no moratorium.
Contents
This change in course is not a retreat, but a pragmatic adjustment. For businesses, understanding the exact nature of this easing is crucial: Is it simply a temporary reprieve, or a genuine reduction in requirements?
This expert article explains the mechanics of the CSRD, the operational obstacles that led to this decision, and analyzes what will actually change for finance departments and CSR through a before-and-after comparison.
1. Understanding the CSRD: A Revolution in Transparency
Before discussing the exemptions, it is essential to recall what the CSRD is and why it represents a major paradigm shift compared to the previous directive, the NFRD (Non-Financial Reporting Directive).
Beyond Simple Reporting
The CSRD, which has been phased in since January 1, 2024, aims to put financial information and sustainability information (ESG—Environmental, Social, Governance) on an equal footing. The goal is clear: to redirect capital flows toward sustainable activities and combat greenwashing.
At the heart of the CSRD is the concept of double materiality, a requirement that transforms the way companies analyze their risks:
-
Impact Materiality:
What is the company’s impact on the environment and society? (“Inside-Out” perspective) -
Financial Materiality:
How do climate and social issues impact the company's financial performance? ("Outside-In" perspective).
ESRS Standards as a Common Language
To ensure that these reports are comparable, Europe has tasked EFRAG (European Financial Reporting Advisory Group) to develop the ESRS (European Sustainability Reporting Standards). These standards cover a vast range of topics, from climate change (ESRS E1) to a responsible workforce (ESRS S1) and corporate conduct (ESRS G1).
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2. The Reality Check: Why Did the System Break Down?
While the political ambition is commendable, the operational reality has proven brutal for the European economy. As soon as the first drafts of the ESRS standards were published, voices were raised to denounce an “administrative tsunami.”
The Complexity of Data Collection
The first obstacle identified is the granularity of the required data. A company subject to the CSRD may potentially need to report more than 1,000 data points if all topics are deemed material. For many companies, particularly mid-sized companies and large SMEs, their information systems (ERP) were simply not configured to capture this information (e.g., Scope 3 GHG emissions, specific pay gaps, and on-site biodiversity).
The Cost of Compliance
Beyond the technical aspects, it was the cost that raised concerns. According to the European Commission’s initial estimates, the implementation cost for a company could range from 0.004% to 0.008% of revenue.
However, industry associations have warned that the actual costs are much higher, including:
- Recruiting CSR experts (who are in short supply)
- software updates
- audit fees (since an audit by an independent third party is mandatory)
The Competitiveness Argument
Finally, a major political obstacle has emerged: a decline in competitiveness.
In a context where the United States (through the Inflation Reduction Act) and China are providing massive support to their industries with fewer reporting requirements, European companies have feared that this administrative burden would put them at a disadvantage.
Companies support the Green Deal, but they are overwhelmed by reporting requirements that divert valuable resources away from innovation and actual decarbonization.
3. Brussels' Response: Why Ease the CSRD Now?
In response to this backlash and with the June 2024 European elections approaching, the European Commission, led by Ursula von der Leyen, promised in the fall of 2023 to reduce reporting requirements for companies by 25 percent.
A sluggish economic climate
Inflation, rising interest rates, and economic stagnation in Germany have forced the EU to reassess its priorities. The mantra has shifted from “regulate to go green” to “simplify to survive.” The goal of deregulation is therefore twofold:
- Give companies the breathing room they need to focus on their core business.
- To ensure continued support from the business community for the European ecological transition initiative, which was in danger of foundering on the rocks of bureaucracy.
Recognition of "Regulatory Fatigue"
The European institutions have implicitly acknowledged that the original timeline was unworkable. EFRAG and the Commission have acknowledged that companies need more time to familiarize themselves with the cross-cutting standards (Set 1) before tackling the sector-specific standards.
4. What’s Really Changing: A Summary Table of the CSRD Relief Measures
This streamlining does not mean the end of the CSRD. It is a tactical realignment that takes the form of concrete measures, primarily focused on the timeline and thresholds for compliance.
Parameter
Initial Situation
Status after the reduction
Tangible Impact
Adoption of Industry Standards
An additional 2-year period to prepare for the specific requirements of various professions
Postponed to June 2026
Scheduled for June 2024
Corporate Reporting
, Non-EU
A respite for international companies operating in Europe.
Postponed to 2026
Required starting in 2024/2025
“Large Enterprise” Threshold
(revenue)
> 40 M€
> 50 million euros
Many mid-sized companies are moving outside the immediate area
“Large Enterprise” Threshold
(total assets)
Inflation adjustment reducing the number of taxpayers
> 25 million euros
> 20 M€
5. Details of the CSRD Relief Measures
The postponement of industry standards
This is the most visible measure. Initially, companies were required to quickly incorporate indicators specific to their industry (textiles, transportation, energy, etc.). This postponement until 2026 allows companies to focus exclusively on universal standards (the first set of ESRS standards) without having to deal with an immediate second layer of complexity.
Raising the size thresholds (inflation adjustment)
The European Commission has adopted a delegated directive amending the thresholds used to define company sizes. Since the CSRD applies based on these thresholds, this has a direct impact on the scope of application.
This effectively exempts several thousand companies from the immediate CSRD requirements or delays their entry into the framework by changing their classification.
Simplification for Small and Medium-Sized Enterprises
6. Even with the CSDR’s relaxed requirements, companies must not slow down
That’s the obvious question all Comex members are asking themselves. Now that the rules are becoming more flexible, is there any rush to wait? The experts’ answer is unequivocal: NO
The relaxation of the CSRD is only a partial solution
While sector-specific thresholds and timelines may change, the core of the framework remains intact. Large publicly traded companies and large simplified joint-stock companies (SAS) that exceed the new thresholds must still publish their first report in 2025 (based on 2024 data). The requirement for double materiality and verification by statutory auditors (CAC) or OTI remains in effect.
Pressure from the Financial Markets (SFDR and Banks)
Regulatory relief does not eliminate market pressure. Investors and banks are subject to their own regulations (SFDR – Sustainable Finance Disclosure Regulation). To make their portfolios more sustainable (and meet their ratios), they absolutely need ESG data from the companies they finance.
Simplification for Small and Medium-Sized Enterprises
EFRAG is in the process of finalizing a streamlined, voluntary standard for unlisted SMEs (VSME). Although not mandatory, it aims to standardize the data requests that large customers send to their SME suppliers, thereby limiting the “cascade” of disorganized requests.
A company that takes advantage of the tax relief to halt its ESG efforts risks being denied access to financing or facing higher interest rates.
The Opportunity for Transformation
As Mairead McGuinness, Commissioner for Financial Services, points out: “Transparency is the new standard.”
The current easing of restrictions presents an opportunity to better prepare, improve data reliability, and strengthen governance—not to cancel projects. Companies that have planned ahead will maintain a major competitive advantage in terms of employer brand and customer trust.
Frequently Asked Questions About the CSRD
What is the CSRD?
Why was the CSRD relief measure implemented?
The streamlining of the CSRD comes in response to concerns raised by the 2024 Draghi Report on European Competitiveness and feedback from the field regarding the complexity of the first reporting cycle. The economic and geopolitical context also played a role in accelerating the decision to streamline the CSRD.
What are the key takeaways from the CSRD's streamlining measures?
In practice, this involves both the postponement of certain deadlines and changes to certain thresholds. As a result, in France, approximately 2,000 to 3,000 companies are now expected to be affected, compared with the 7,000 initially projected.
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