The European Parliament and EU member states have reached an agreement to amend the sustainability reporting rules companies must follow.
The provisional deal on the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) was reached after so-called trilogue discussions between the Parliament, member states and the European Commission.
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The talks were on moves to standardise and simplify sustainability reporting and due-diligence obligations for businesses operating within the EU.
Under the terms of the new agreement, only EU companies with more than 1,000 employees on average and an annual net turnover exceeding €450m ($524m) will be subject to social and environmental reporting requirements.
For non-EU firms, the threshold for sustainability reporting has been set at €450m in annual net turnover generated within the EU.
Reporting requirements are also set to become more quantitative, with sector-specific disclosures shifting to a voluntary basis.
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By GlobalDataSmall companies employing fewer than 1,000 people will not be required to provide additional information beyond what is established in voluntary standards and they retain the ability to decline requests for further data.
The deal stipulates that only large corporations, those with over 5,000 employees and annual net turnover above €1.5bn, must conduct due-diligence measures aimed at reducing negative impacts on people and the environment.
These rules will also apply to non-EU firms meeting the same revenue threshold within Europe.
Firms required to follow these revised due-diligence standards will no longer need to prepare business model transition plans compatible with the Paris Agreement.
Accountability for non-compliance will remain at national level rather than at the EU level, with possible fines reaching up to 3% of a company’s global net turnover, as directed by guidance from both the European Commission and member states.
The agreement includes provisions for a digital portal managed by the Commission that will offer businesses access to templates and guidance on both EU and national reporting requirements.
These changes aim to reduce administrative burdens, particularly for smaller entities, by focusing obligations on larger companies considered likely to have greater environmental impact.
“Today we delivered on our promise to remove burdens and rules and boost EU’s competitiveness. This is an important step towards our common goal to create a more favourable business environment to help our companies grow and innovate,” Marie Bjerre, Denmark’s Minister for European Affairs, said.
Members of the European Parliament approved the revisions during a vote on 13 November.
The provisional agreement requires formal approval from both the Parliament and the Council before being published in the Official Journal of the EU and entering into force upon publication.
MEP Jörgen Warborn said: “We have secured a very good compromise. We are making the sustainability rules easier to comply with, delivering historic cost reductions for businesses and still delivering for European citizens. This is a win for competitiveness and a win for Europe.”
Last month, The European Ombudswoman ruled the European Commission committed maladministration by bypassing key transparency and evidence-based procedures when drafting legislative proposals that included changes to corporate sustainability due diligence.
“The Commission must be able to respond urgently to different situations, particularly in the current geopolitical context. However, it needs to ensure that accountability and transparency continue to be part of its legislative processes and that its actions are clearly explained to citizens,” Teresa Anjinho said.
“In future, a better balance needs to be struck between having an agile administration and guaranteeing minimum procedural standards for law-making. Certain principles of good law-making cannot be compromised even for the sake of urgency.”
