Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), Tassonomia UE: these are some of the most important European legislations regulating the requirements for companies to account for their impact on the environment. It took years to draft them, pass them, implement them. They were close to being applied to even the smallest companies, and now, suddenly, they are at risk.
The Omnibus Package
On February 26, the European Commission unveiled a set of legislative proposals that would amend these three directives: the Omnibus package. Brussels’ stated aim is to “simplify EU rules, stimulate competitiveness and free up additional investment capacity,” in short: fewer obligations, fewer companies involved and lower costs. The EU Commission speaks of a step forward; for many, however, it is a resounding step backward on the road to energy transition and environmental protection.
And European authorities seem to be in a great hurry to introduce these changes. In fact, on April 3, the European Parliament overwhelmingly approved the Omnibus “stop-the-clock” proposal, a mechanism to postpone the implementation of regulations, in this case the implementation of the CSRD and CSDD. All that will be needed at this point is approval by the European Council to make the new deadlines official.
Sustainability Reporting Directive (CSRD) simplified
There are two main interventions in the Omnibus package regarding the Corporate Sustainability Reporting Directive:
- the sustainability reporting requirement will apply only to companies with at least 1,000 employees and a turnover of more than 50 million euros, or with assets of more than 25 million euros. An intervention that significantly reduces the number of companies obliged to report on their sustainability.;
- the adoption of the legislation slips by two years, until 2028.
Due diligence directive, fewer controls for the supply chain
Regarding the Corporate Sustainability Due Diligence Directive (CSDD), here are the main proposals for action:
- monitoring of the supply chain has been effectively eliminated, or radically reduced. Companies will, in fact, have to focus their monitoring on direct business partners, and sustainability assessments will be conducted every five years instead of annually.
- civil liability at the European level has been removed, although the right to compensation for victims of harm remains guaranteed.
- the entry into force has been delayed until 2028, with publication of the guidelines scheduled for 2026.
EU taxonomy: small enterprises excluded from obligations
The main change requested for the Taxonomy is:
- the voluntary application for smaller companies: the requirement to report alignment with EU Taxonomy criteria will be optional for smaller companies, while it will remain mandatory for larger companies. This change is intended to reduce the administrative burden on SMEs.
Commission thinks about savings…
On its website, the European Commission speaks of “total annual administrative cost savings of around €6.3 billion” and “additional public and private investment capacity of €50 billion in support of policy priorities”. But there are many who dispute these numbers in the face of easing business sustainability rules. The Commission itself in its report “The costs of not implementing EU environmental law” had found that “not complying with European environmental legislation destroys value to the tune of 55 billion euros a year”. The new proposals seem at odds with these figures.
…but concerns of investors and NGOs grow
There are many NGOs, investors, and environmental associations stressing the importance of maintaining sustainability data monitoring and not overly expanding the number of companies exempt from reporting requirements.
In the coming days and weeks, we will devote a series of insights to how each of the directives involved changes and the consequences that could result.
