CSRD delays shouldn’t make you complacent

CSRD delays were in the news this week, as over two thirds of EU member states missed a key deadline for implementing the new rules. 

It isn’t the first teething issue for the initiative, designed to reset and harmonise sustainability reporting standards throughout Europe. Given the bloc’s diverse nature and different legal needs in each state, delays have cropped up before, and they will again. 

Corporate leaders, however, should not take news like this as an invitation to become complacent. CSRD remains a landmark regulation that will have a major impact on businesses—small and large—over the next decade. 

Failing to prepare for those new rules now could bring new, long-term risks to your business, harming your strategic expectations.

CSRD’s implementation appeared to hit a stumbling block this week when the European Commission announced the beginning of “infringement procedures” against seventeen member states over failure to transpose the new rules into their national laws. 

The states are Belgium, Czechia, Germany, Estonia, Greece, Spain, Cyprus, Latvia, Luxembourg, Malta, the Netherlands, Austria, Poland, Portugal, Romania, Slovenia and Finland.

The EU regularly passes new laws in the form of directives. This means the bloc will only set its desired standards and leave it to member states to pass laws to achieve them. This is purposefully done so the same inflexible regulations won’t land bluntly on 27 different legal jurisdictions. 

When states pass these laws, they are “transposing the directive.” Usually, they need to do this by a certain deadline, and the Commission has now decided that seventeen member states have not effectively transposed CSRD in time. Therefore, infringement procedures have begun, and in the most extreme cases, they could lead to legal action through the European Court of Justice and financial penalties.

No. 

The start of infringement proceedings is the first of many stages in the directive-transposing process. The affected countries are simply being asked to report on the laws they still need to pass and when that might happen. Those reports could easily assure the Commission that progress is being made. Things will only get more serious if the Commission isn’t satisfied with the response. 

That’s the thing with the EU: It’s so uniquely diverse, with different legal systems, that it can often take time to craft new laws so they make sense on the ground; it’s only natural that delays emerge. 

This is not the first time directive deadlines have been missed, and it certainly won’t be the last. The EU often pays this price when trying to regulate its diverse single market.

Of course. The transposition deadline passed in July 2024, so the EU only took three months to follow up. This is a good indication of the Commission’s desire to ensure CSRD’s implementation remains on track and has a broad impact. 

At the announcement of infringement proceedings, the body said that it would “not be possible to achieve the necessary level of harmonisation of sustainability reporting in the EU” without a properly-transposed CSRD and that “investors will not be in a position to take into account the sustainability performance of companies when making investment decisions.”

The EU has repeatedly committed itself to ambitious targets related to environment, social, and governance principles. The bloc is serious about those targets, so delays in transposition will not stop it from achieving its goals.

The most important takeaway is that corporate leaders should not get complacent about CSRD. 

While it might be easy to read news like this and think there’s no urgent need for compliance, that is a mistake. 

CSRD remains a robust directive that will hugely impact businesses of all sizes. It will standardise reporting and mandate a more in-depth analysis of businesses’ approach to sustainability. Teething issues will only hold it back a little bit. 

Because of that, it remains crucial that you have the necessary personnel, expertise and capacity to fully comply with CSRD if it applies to you. Penalties for getting it wrong could include reputational nightmares, loss of investment, and financial penalties. Ultimately, it doesn’t matter if you’re in a state that has already transposed the rules or is receiving infringement proceedings; eventually, the laws will matter everywhere.

CSRD delays shouldn’t make you complacent – The Corporate Governance Institute