A new European regulation will free more than 80% of community companies from their obligations to provide information on the environmental impact of their activities. The 27 EU member states, the European Parliament and the European Commission agreed on Tuesday on the first of omnibus laws aimed at simplifying rules and bureaucracy for businesses, which will significantly narrow the scope of corporate sustainability disclosure rules introduced during the last parliamentary term.
The regulation, which received the green light after a marathon of negotiations, is part of a trend that ensures that if the green agenda is scrapped, European competitiveness and economic growth can be boosted. It is a controversial move that has also united mainstream conservative lawmakers and the Eurosceptic far-right.
The agreement goes beyond what the European Commission had proposed and constitutes a victory for the head of the Community executive, Ursula von der Leyen, who proposed as one of the objectives of her second mandate to reduce bureaucracy for businesses, in a way that countries like Germany have demanded, which instead of “simplification”, as defined by the European Commission, speaks of “deregulation”.
Last year, the EU adopted a set of rules requiring large companies to carry out human rights and environmental due diligence across their operations and value chains to comply with the Sustainable Development Due Diligence Directive (CSDDD). It requires them – as well as listed companies – to disclose detailed information on their environmental, social and governance impact, including their climate strategy and transition plans (Corporate Sustainability Reporting Directive, CSRD).
This means that they have had to publish, for example, data on their greenhouse gas emissions, the impact of rising temperatures on working conditions, chemical leaks and whether their suppliers (European and international) respected human rights and labor laws, particularly in relation to child exploitation.
The new agreement amends these two key pieces of legislation. From now on, in the absence of a Parliament vote next Tuesday on the agreement reached in the early hours of Monday to Tuesday, social and environmental information will only apply to EU companies with more than 1,000 employees and an annual net turnover above 450 million euros, compared to the limit of 50 million euros initially proposed by the Commission. According to the Danish Presidency of the Council of the EU, which managed the negotiations this semester on behalf of the member states, 85% of companies will thus be exempt.
In the duty of care directive (CSDDD), the threshold has been drastically lowered: instead of applying to companies with more than 1,000 employees and a turnover of at least 450 million euros, the obligation will now only cover those with more than 5,000 employees and an annual turnover of more than 1.5 billion euros. The new reporting regime also eliminates mandatory climate transition plans entirely.
“This is an important step towards our common goal of creating a more favorable business environment that helps our businesses grow and innovate,” said Marie Bjerre, Danish Minister for European Affairs. “This deal represents a historic cost reduction,” said Jörgen Warborn, an MEP from the European People’s Party (EPP), who led the negotiations in Parliament and who denied that the new rules represent a fatal new bite to the European Green Deal. “It’s a victory for competitiveness and a victory for Europe,” he insisted amid the controversy between environmental organizations.
In recent days, the EU has also reversed course on another key environmental law, the law on deforestation with which the EU wanted to be a pioneer in the fight against a scourge that threatens climate balance and which, according to what was agreed between MEPs and States, will finally come into force a year later, in December 2026 (it had already been delayed by 12 months).
In addition, regulations that aim to prevent products like cocoa, coffee, palm oil, wood or rubber consumed in the EU from generating deforestation at source, will make it significantly decaffeinated compared to the initial ambitions “to facilitate its application by companies, international actors and member states”, according to the official justification. Critics warn, however, that this agreement, which still needs to be ratified by both parties, is dangerous not only in terms of environmental impact, but also because the new revision adds uncertainty to closed legislative commitments, something the Commission intends to continue to do with its new “simplifying” revisions.
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