In order to ease the regulatory burden for companies, the European Union proposes a number of sustainability regulations will be “simplified”. It estimates that this will result in a saving in administrative costs around EUR6.3bn per year.
In the recently published ‘Vision for Food and Agriculture,’ it had pledged that sustainability regulations would be simplified.
The Corporate Sustainability Reporting directive (CSRD) as well as the upcoming Corporate Sustainable Due Diligence (CSDD) will be affected.
What are the proposed changes?
It proposes that 80% of businesses be removed from the scope of CSRD. The EU will focus primarily on the larger companies. The EU will delay the reporting obligations under this scope until 2028. They are now set at 2026-2027.
The CSDDD also seeks to reduce the reporting requirements of EU Taxonomy, which require companies to provide sustainability reports, to the CSDDD’s scope. It will allow reporting of activities that are “partially aligned” with EU Taxonomy. The reporting templates will reduce by 70 percent and an introduction of a threshold for financial materiality will take place.
It is important to note that the report will ensure large corporations are not “burdened” by sustainability reporting obligations within their value chain.
The scope of due diligence will also be limited, which affects the CSDDD. Due diligence systems will focus on “direct” business partners and the periodic assessment of partners from every year to five years will reduce.
EU is hoping to reduce burdens on SMEs by reducing the amount of data required for value chain mapping.
The CSDDD European civil liability clauses are to be removed, as they make companies responsible for any harm their products cause, but victims will still have the right to compensation.
The application of due diligence for sustainability requirements to the biggest companies will be delayed by an additional year, to 26 July 2028. And the approval of guidelines is to be advanced one year to July 2026.
It also aims at harmonising the sustainability due diligence across all of Europe.
According to the EU, along with the estimated cost savings, proposed changes are expected to mobilise approximately EUR50 billion for’supporting public priorities’.
The EU Council and Parliament will be asked to review these changes.
“Simplification promised, simplification delivered!” said EU Commission President Ursula von der Leyen in a statement.
We are pleased to present our first comprehensive proposal. EU-based companies will gain from simplified rules for sustainable finance reporting and due diligence, as well as taxonomy. It will simplify our business operations while keeping us on track to achieve our carbon reduction goals. “And more simplification will be coming.”
What has the public said?
Some groups have criticised the proposals.
World Wildlife Fund, for example, described the proposed changes as “deeply flawed.” It appeared to be leading towards “a reckless proposal which would destroy the EU’s corporate sustainability reporting framework and due diligence framework, a framework that has been carefully constructed over the last eight years,” stated Sebastien Godinot, senior economist at WWF European Policy Office.
The European Green Deal has suffered a major blow after Von der Leyen repeatedly committed to not deregulate but to simplify.
