Regulations you should watch in 2024

The regulatory landscape is ever-changing, which is why our Regulatory Advisory team has summarized 3 regulation updates that will take effect in 2024. Explore the latest developments shaping the financial landscape:

• Adoption of the European Commission work programme 2024: The European Commission puts new focus on simplifying reporting rules to boost competitiveness
• Postponements of deadlines within the Accounting Directive: The amendment aims to rationalize and simplify reporting requirements
• German Supply Chain Due Diligence Act: The scope extends to more companies starting January 2024

The Commission adopted its 2024 work programme in October 2023, which puts a new focus on additional simplification proposals for reporting requirements.

This follows up on President von der Leyen’s commitment to reduce reporting requirements by 25% for companies, in line with the strategy to boost the EU’s long-term competitiveness and to provide relief for companies.

This Burden Reduction Package proposal, the aim of which is to reduce and streamline reporting across multiple policy areas, has implications for the Corporate Sustainability Reporting Directive (CSRD) and the EU Taxonomy Regulation. One point of the Burden Reduction Package proposal is to adjust the thresholds of the Accounting Directive so that many companies will benefit from reduced CSRD reporting requirements:

• Small undertakings: the balance sheet goes from EUR 4 million to EUR 5 million and the net turnover threshold form EUR 8 million to EUR 10 million.
• Large undertakings: The balance sheet total goes from EUR 20 million to EUR 25 million and the net turnover threshold from EUR 40 million to EUR 50 million.

In addition, there is a proposal for additional clarification regarding EU Taxonomy Regulation which states that no assessment is needed for activities that are not material to business or where companies lack evidence or data to provide compliance.
The Commission will work closely with the European Parliament and Council and support them to facilitate swift agreements with regard to the European election in June 2024.

The European Commission has proposed a decision to amend Directive 2013/34/EU, aiming to rationalize and simplify reporting requirements. The proposal postpones the adoption deadline for sustainability reporting standards for certain sectors and third-country undertakings by 2 years, giving companies sufficient time to prepare for any new reporting requirements. 

The Accounting Directive (2013/34/EU) as amended by the Corporate Sustainability Reporting Directive (CSRD) requires large companies and listed small and medium-sized companies (SMEs) as well as parent companies of large groups to include in a dedicated section of their management report

• the information necessary to understand the company’s impacts on sustainability matters,
• the information necessary to understand how sustainability matters affect the company’s development, performance, and position. 

This sustainability information must be reported in accordance with European Sustainability Reporting Standards (ESRS). A first set of ESRS was adopted by the Commission on 31 July 2023. The ESRS in this first set are sector-agnostic, meaning that they apply to all undertakings under the scope of the CSRD, regardless of which sector or sectors the undertaking operates in. 

Article 29 of the Accounting Directive originally set 30 June 2024 as the deadline for adopting sector-specific ESRS. However, there is now a proposed extension of this deadline to 30 June 2026. 

Additionally, Article 40b of the Accounting Directive initially stipulated 30 June 2024, as the adoption date for ESRS applicable to certain non-EU companies conducting business within the Union. This deadline is also intended to be extended to 30 June 2026. 

The decision to postpone the adoption deadline aligns with the Commission's broader initiative to reduce regulatory burdens and enhance the business environment in the EU. The overarching goal is to ensure that reporting requirements serve their intended purpose while minimizing administrative complexities.

In July 2021, Germany has incorporated a ground-breaking law with the aim of ensuring ethical business practices and focus on human rights are addressed and implemented in global value chains of German companies:

• The law applies to companies with over 3,000 employees from January 2023, and starting from January 2024 to those with over 1,000 employees.
• LkSG includes all products and services of a company and their developments in the supply chain, starting with extraction of raw materials all the way to delivery to the end customer.
• Apart from establishing an effective risk management system, companies must establish an internal complaints procedure for reporting human rights and environmental risks and violations.