Dive Brief:
- Member-states of the European Council adopted a proposal to “stop the clock” and delay reporting timelines on the European Union’s Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive, the council announced Wednesday.
- With the council’s approval on the measure to delay the next wave of CSRD reporting and first phase of the CSDDD until 2028, approval by the European Parliament — its co-legislator — is the final hurdle to adopting the delay. The European Parliament has scheduled a vote on the proposal for Tuesday, April 1, according to the March 26 release.
- The European Commission adopted a proposal for the two-year delay, along with other changes to the two laws and sustainability reporting requirements, in a package of bills last month. The council said its approval last week also allows it to begin negotiations with Parliament on the simplification proposal.
Dive Insight:
The European Commission’s proposal to simplify corporate sustainability reporting in the bloc would remove an estimated 80% of companies from the CSRD’s scope, in changes to be finalized by the council and parliament over the next year, the commission noted in February. The omnibus package was proposed in response to calls for simplification from the European Council last fall, the March 26 release said.
Adam Szłapka, a Polish politician and council member, said in the announcement that “simplification is one of the priorities” for Poland’s time holding the Council’s presidency. Poland took reins of the European Council Presidency on January 1 and will later pass the presidency to Denmark on July 1. Szłapka called the agreement “a first step on our decisive path to cut red tape and make the EU more competitive.”
If the European Parliament votes to approve the “stop-the-clock” proposal, large companies who have not started reporting, as well as required small- and medium- entities, would have an additional two years to begin compliance with the CSRD. Meanwhile, the largest companies required to comply with the CSDDD will have an additional year before the application phase begins.
Negotiations and final passage of the simplification of the underlying reporting laws is expected to take up to a year, according to EU policy lobbyists and advisers. Following parliament’s expected passage of the stop the clock proposal, the European Parliament and European Council will negotiate on the omnibus package's proposed changes.
The European Commission proposed raising the employee threshold for companies to be considered in-scope of the CSRD — from 250 employees to 1,000 employees — along with revising and simplifying the reporting standards to “substantially” reduce the number of data points and make it more consistent with other pieces of legislation. The proposed revisions would also limit the information in-scope companies could request from supply chain companies with fewer than 1,000 employees.
Proposed changes to the CSDDD include a longer interval for regular supply chain assessments and the removal of a provision to “systematically conduct in-depth assessments” of its supply chain for adverse effects. Instead, companies will only have to do a full due diligence, beyond its direct partners, “in cases where the company has plausible information suggesting that adverse impacts have arisen or may arise there.”
Both laws have also drawn the ire of Congressional Republicans. House Financial Services Chair French Hill, R-Ark., said the CSDDD should be treated as a “non-tariff barrier” for U.S. companies. Additionally, Sen. Bill Hagerty, R-Tenn., has introduced a bill that would bar U.S. companies that are “integral to the national interests of the United States” from complying with “any foreign sustainability due diligence regulation.”
As the EU is fast-tracking its stop-the-clock proposal and simplification efforts, the U.S. Securities and Exchange Commission has ceased defending its climate-risk disclosure rule in court. The agency communicated its withdrawal to the court after previously asking to delay arguments in lawsuits over the regulation.
