8 Key Takeaways From Proposal To Reduce EU Sustainability Reporting Requirements

Introduction

In an effort to alleviate the regulatory pressures on businesses, the European Union is reforming key components of theGreen Deal, specifically targeting the EU Taxonomy, Corporate Sustainability Reporting Directive (CSRD), and Corporate Sustainability Due Diligence Directive (CSDDD). These reforms aim to simplify compliance, reducing the administrative burden while maintaining the EU’s commitment to sustainability and climate action. This initiative is part of the EU’s broader goal to meet the Paris Agreement’s objectives, which include achieving net-zero greenhouse gas emissions by 2050. The proposed changes mark a significant shift in balancing business needs with environmental and social responsibilities.

Corporate Sustainability Reporting Directive (CSRD)

The CSRD has undergone notable revisions to ease the reporting requirements for companies. Initially, the directive required businesses meeting specific financial and employee thresholds to report on their sustainability practices. However, the new proposal narrows the scope, now targeting only large companies with over 1,000 employees and €450 million in annual turnover. This adjustment is expected to exempt approximately 80% of previously affected companies, particularly small and medium-sized enterprises (SMEs). Furthermore, the implementation timeline has been extended by two years, allowing businesses to adapt without incurring unnecessary costs. SMEs are further protected by limiting the information they must provide, ensuring that their reporting remains manageable and less burdensome.

Corporate Sustainability Due Diligence Directive (CSDDD)

The CSDDD has also been refined to focus on direct business partners, reducing the scope of due diligence requirements. While indirect partners may still be included under certain conditions, companies are no longer obligated to request extensive information from SMEs with fewer than 500 employees. Additionally, the penalties for non-compliance have been revised, removing the mandatory 5% minimum fine based on global turnover. This change allows member states more flexibility in determining appropriate penalties. The definition of stakeholders has been narrowed, excluding consumers and external organizations not directly impacted by a company’s actions, thereby limiting the influence of activist groups.

Simplifying Reporting Standards

Recognizing the complexity of existing sustainability reporting standards, the EU has decided to revisit the European Sustainability Reporting Standards (ESRS). The first wave of standards will be simplified, with sector-specific requirements being eliminated. This move aims to provide clarity and reduce the administrative load on businesses. The revision process involves stakeholder feedback, ensuring that the standards remain relevant while being more user-friendly.

Protecting SMEs

SMEs are at the forefront of these reforms, with measures in place to shield them from excessive reporting and due diligence responsibilities. The ukazatel’ protects SMEs by limiting the information they must disclose, preventing them from being overburdened. This protection ensures that SMEs can continue to operate without being sidelined by compliance costs, fostering a more inclusive economic environment.

Future and Conclusion

The future of the CSRD and CSDDD hangs in the balance as the EU navigates the legislative process. While the proposed reforms aim to streamline regulations, they are expected to spark lively debates between business interests and environmental advocates. The outcome will likely be a nuanced balance that supports both economic growth and sustainability goals. As the EU moves forward, the focus will remain on creating a regulatory framework that is both effective and manageable, ensuring that businesses can thrive while contributing to a sustainable future.