The legal affairs committee of the European Parliament has decided to extend the deadline for sector-specific sustainability reporting standards from 2024 to 2026. This extension would result in a delay in the implementation of sustainability disclosure standards and reporting requirements for non-EU entities until 2026. The decision to extend the deadline falls under the Corporate Sustainability Reporting Directive (CSRD). Meanwhile, US fashion brands have expressed dissatisfaction with the supply chain disclosure mandates of the New York Fashion Act, citing the high level of compliance required as a major concern.
Originally enacted in November 2022, the CSRD initially imposed reporting requirements on both publicly traded and privately held businesses within the EU, with enforcement scheduled to begin in 2024. The directive also outlined the establishment of European Sustainability Reporting Standards (ESRS), to be overseen by the European Financial Reporting Advisory Group (EFRAG).
Axel Voss, the rapporteur of the Legal Affairs Committee, emphasised that European companies have faced significant challenges and bureaucratic burdens during the COVID-19 pandemic and the war in Ukraine, along with its impact on energy prices. Voss stated that postponing the adoption date by 2 years would be crucial for companies within the scope of CSRD to recover, without negatively impacting sustainability reporting objectives.
The Commission has acknowledged the additional burden imposed by these reporting requirements on companies, particularly small and medium-sized enterprises (SMEs), and aims to simplify these requirements and reduce the associated burdens by 25 per cent.
The fashion industry’s response to this update in the legislative timeline is likely to be mixed, with some expressing frustration and others feeling relief. There are justifiable criticisms that any delay in mandating disclosure will impact negatively on environment, as well as claims that reporting requirements that are impractical to comply with will not achieve their intended effect.
