The European Commission is set to roll back sustainability reporting requirements for businesses as part of a broader strategy to reduce regulatory burdens. The proposed changes, expected to be officially announced next week, could significantly alter the landscape of corporate sustainability disclosures in the EU.
Balancing regulation and competitiveness
The revised proposal seeks to simplify green rules for businesses, a move aimed at enhancing the competitiveness of European industries. This comes amid increasing pressure from key member states like Germany and France, which argue that the current sustainability reporting framework imposes excessive costs and administrative challenges on companies. On the other hand, nations such as Spain insist that these rules are essential for maintaining the EU’s commitments to environmental and human rights standards.
Key changes to the Corporate Sustainability Reporting Directive (CSRD)
Under the current EU Corporate Sustainability Reporting Directive (CSRD), companies with more than 250 employees and a turnover exceeding 40 million euros are required to disclose detailed information about their environmental and social impact. However, the proposed amendments would significantly narrow the scope of these obligations:
- Only companies with more than 1,000 employees and a net turnover exceeding 450 million euros ($471 million) would be required to comply.
- The EU plans to scrap sector-specific reporting standards that were originally set to be introduced by June 2025.
These changes are part of a wider effort to cut bureaucratic hurdles for businesses while still maintaining a level of corporate accountability.
Another significant shift outlined in the draft proposal is the delay of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). The law, designed to hold corporations accountable for human rights and environmental abuses in their supply chains, would be softened under the proposed changes. Companies would only be required to conduct due diligence on their direct business partners and subsidiaries, rather than extending their assessments to all subcontractors and suppliers.
Read more: EU approves Corporate Sustainability Due Diligence Law
This move to scale back its sustainability reporting framework could have far-reaching consequences. While reducing compliance costs may enhance competitiveness, critics argue that weaker regulations could undermine efforts to hold corporations accountable for their environmental and social impacts.
For Africa, where many European companies source raw materials and manufacture goods, the dilution of due diligence requirements could increase the risk of unethical practices in supply chains. Without stringent oversight, concerns around labor rights violations, deforestation, and environmental degradation in supplier countries may be harder to address.
As the EU finalizes its regulatory adjustments, the debate between economic efficiency and sustainability commitments is set to intensify. The upcoming official announcement will reveal whether Brussels manages to strike a balance between easing business regulations and maintaining its leadership in global sustainability efforts.
