4 of 5 companies would be exempt from EU corporate sustainability reporting as part of Brussels’ anti-red tape drive.
BRUSSELS — The vast majority of businesses in the European Union would no longer have to disclose their impact on the environment or exposure to the risks of climate change under a proposed bill that significantly winds back the scope of key EU green laws.
The European Commission announced Wednesday it wants to exempt 80 percent of companies from its mandatory sustainability disclosure requirements as part of its eagerly anticipated omnibus simplification package.
The first of a planned series of red tape-slashing laws, the bill proposes to amend four key rules from the European Green Deal: The corporate sustainability reporting directive (CSRD), the corporate sustainability due diligence directive (CSDDD), the EU taxonomy on sustainable investments and the carbon border tax.
Under the proposed changes, implementation of the CSRD will be delayed by two years and only companies with more than 1,000 employees and either at least €50 million in turnover or a balance sheet of more than €25 million would have to report.
That would slash the number of businesses affected by the law from 50,000 to around 10,000, said one EU official on condition of anonymity because they were not authorized to speak publicly.
An earlier leaked draft, obtained by POLITICO, had put the turnover threshold higher, at €450 million.
However, companies will still have to report on both their exposure to climate risk and the effects of their activities on the environment — a concept known as double materiality that is a core part of the CSRD and a paradigm-shifting approach to green reporting. An earlier draft had removed double materiality, according to three people briefed on the matter.
The bill proposes reducing by half the number of data points companies must collect, and dropping sector-specific reporting standards due in 2026.
The proposal also significantly waters down the CSDDD, which holds companies accountable for human right violations and environmental damage in their supply chains. The changes would require companies to only look at direct suppliers. The law’s implementation would be postponed until negotiations are completed.
Under the changes, the frequency with which companies are expected to monitor suppliers would be reduced to once every five years, down from annually.
The bill also proposes making the taxonomy voluntary for up to 85 percent of companies — meaning they would not have to report on whether they are aligned with the EU’s list of economic activities considered green.
Finally, the bill suggests changing the Carbon Border Adjustment Mechanism (CBAM) to exempt roughly 90 percent of importers of goods covered by the tax, which it says are only responsible for about 1 percent of imported emissions. The Commission is not suggesting delaying its implementation, however.
The Commission said the changes would save businesses “around €6.3 billion” in administrative costs and “mobilize additional public and private investment capacity of €50 billion.”
‘Disgraceful’
The announcement immediately drew criticism from members of the European Parliament and green groups.
“Today is a contradictory day for European climate action,” said Pascal Canfin, a French MEP with centrist group Renew. While the Clean Industrial Deal, announced earlier Wednesday, affirms green goals, he said the omnibus package “weakens certain foundations of the Green Deal.”
“While we managed to preserve double materiality in the CSRD, the drastic reduction of its scope weakens our ability to attract transition capital,” he said, adding that the CSDDD change “looks like massive deregulation.”
Beate Beller, a campaigner at Global Witness, said: “Commission President von der Leyen’s attack on her own sustainability agenda is disgraceful.”
But Commissioner for Financial Services Maria Luís Albuquerque rejected suggestions the bill amounted to deregulation, saying at a press conference: “This does not mean that 80 percent of companies will no longer report, it just means they won’t have to — which is a substantial difference.”
She said some elements of green reporting rules had “proven to be too burdensome and in some cases disproportionate.”
Valdis Dombrovskis, the commissioner for simplification, added the EU executive had “been very clear that our simplification agenda is not deregulation, and we are not changing our Green Deal goals and targets.” He said the bill would help deliver the aims of the European Green Deal “in a more efficient and less costly way.”
The bill must be approved by the European Parliament and the Council of the EU before it becomes law.
Leonie Cater and James Fernyhough contributed to reporting.
This article has been updated with additional details and quotes.
Source: Brussels confirms dramatic U-turn on corporate green rules – POLITICO