JUNE 26: People walk by an European flag (Photo by Michele Tantussi/Getty Images)
The future of sustainability reporting in the European Union is in peril as legislators debate the Omnibus Simplification Package. The current proposal includes significant changes to the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directives. As the legislative process unfolds in the Parliament, members are submitting proposed amendments through various committees. In the Committee on Employment and Social Affairs, a draft opinion expresses clear opposition to any reductions to the CSRD or the CSDDD.
From 2020 – 2024, a trilogy of directives were passed by the EU to force businesses to address climate change and report greenhouse gas missions. The Taxonomy for Sustainable Activities created a classification system for business and investors to know what activities are considered green or climate friendly. The CSRD created requirements for businesses to report GHG emissions and other environmental, social, and governance actions. The CSDDD, also known as the CS3D, created legal liability for companies in relation to their supply chain.
While the gains excited activists, the cost of these proposals on businesses and the broader impact on the EU economy became a theme during the 2024 European Parliament elections. The shift to the right in EU politics embolden opponents to the European Green Deal directives. As a result, the Commission proposed a package of new directives to “reduce the burden” on businesses.
The Omnibus Simplification Package was officially adopted by the Commission in February. The proposal is being debated in the Council and the Parliament. In the Parliament, the debate is public and working through multiple committees, giving interest parties and MEPs the opportunity to voice their opinions.
The Committee on Legal Affairs, known as JURI, is the primary committee that will produce the legislation that will be sent to the full Parliament for a vote. However, related committees will draft opinions to be considered during the process.
Each committee designates a rapporteur to lead the drafting. The Parliament states that a “rapporteur is appointed in the responsible parliamentary committee to draft a report on proposals of a legislative or budgetary nature, or other issues. In drafting their report, rapporteurs may consult with relevant experts and stakeholders. They are also responsible for the drafting of compromise amendments and negotiations with shadow rapporteurs.”
The amendments change the Commission’s language in the Omnibus Simplification Package, not the original CSRD and CSDDD. Rather than offering sweeping amendments that encompass every change a MEP or Party wants to see, every change to every subparagraph is offered in a separate amendment. This results in a high volume of amendments.
The Committee on Economic and Monetary Affairs, known as ECON, and the Committee on the Environment, Climate and Food Safety, known as ENVI, posted 987 amendments proposed by their respective members.
In the Committee on Employment and Social Affairs, known as EMPL, the committee chose to post a draft opinion by the rapporteur before posting amendments by members. Committee members have until June 3 to offer amendments before the June 4 vote.
European Parliament
The draft opinion was submitted by MEP Li Andersson of The Left, rapporteur for the opinion. The draft included language that directly criticizes the Commission and objects to changes. While the opinion is may not be adopted as the final committee draft, and will likely have minimal impact on the final vote, the language will certainly excite activists and like minded MEPs.
In the “short justification” included in opinions to provide context for canges, Andersson made her opposition to the changes clear.
“The current Commission proposal risks watering down the core elements of this newly established sustainability reporting and due diligence framework. Although the aim of simplification in terms of reporting duties for companies is laudable… simplification cannot mean broad sweeping deregulation that changes the entire purposes of the previous directives. Dismantling core parts of the legislation risks not only creating regulatory uncertainty for companies, barring proper access to justice for those harmed, but also hampers the availability of quality, comparable and granular sustainability data that is much called for by investors and business partners alike…”
Of the MEP’s 49 proposed amendments, 40 simply delete language proposed the Omnibus Simplification Package, leaving the existing language in original directives intact. This includes the employee thresholds for companies to fall under reporting requirements. Three proposed amendments include language that is worth highlighting.
Amendment 1
The first proposed amendment addresses the first paragraph of the Omnibus in which the Commission states their reason for the changes. The Commission references “A simpler and faster Europe: Communication on implementation and simplification” sent on February 11 in which they outline their vision. Andersson, and many like minded individuals, took issue with the process used and the need for action.
Original language as proposed by the Commission: “… the European Commission set out a vision for an implementation and simplification agenda that delivers fast and visible improvements for people and business on the ground. This requires more than an incremental approach and the Union must take bold action to achieve this goal…”
Andersson’s Proposed Amendment: “…the European Commission set out a vision for an implementation and simplification agenda, which is leading to unpredictability and legal uncertainty by rolling back on legal obligations recently adopted at Union level under the guise of reducing administrative burden. The consequences of such an agenda will have rippling effects, with increasing political risks particularly for first movers. In order to safeguard the ambition of the current legal acquis, it is important to oppose such measures.“
Amendment 2
The second proposed amendment addresses the second paragraph in which the Commission states their goals. Andersson not only takes issue with, what some perceive as, an overbearing approach by the Commission, but also addresses concerns relating to the process used. Those concerns have resulted in an investigation by the European Ombudsman, although they are unlikely to impact the final result.
Original language as proposed by the Commission: “In the context of the Commission’s commitment to reduce reporting burdens and enhance competitiveness, it is necessary to amend Directives 2006/43/EC3 , 2013/34/EU4 , (EU) 2022/24645 and (EU) 2024/1760 of the European Parliament and of the Council, whilst maintaining the policy objectives of the European Green Deal, and the Sustainable Finance Action Plan.“
Andersson’s Proposed Amendment: “In the context of the Commission’s commitment to reduce reporting burdens and enhance competitiveness, the Comission (sic) has declared that it is necessary to amend Directives 2006/43/EC3 , 2013/34/EU4 , (EU) 2022/24645 and (EU) 2024/1760 of the, without conducting any impact assessment and limiting public consultation to a closed-door stakeholder event.”
Amendment 42
A major theme in the push for simplification is the impact sustainability reporting could have on small and medium-sized enterprises. In addition to the high cost on businesses that are required to comply with sustainability reporting requirements, businesses interests also expressed concerns that the costs will adversely impact SMEs that are not required to report, but are indirectly forced to gather information in the course of doing business with large companies. The Commission has made it clear they want to prevent SMEs from being forced to pay to gather data beyond minimum requirements.
Original language as proposed by the Commission: “Member States shall ensure that, for the mapping provided for in paragraph 2, point (a), companies do not seek to obtain information from direct business partners with fewer than 500 employees that exceeds the information specified in the standards for voluntary use referred to in Article 29a of Directive 2013/34/EU…“
Andersson’s Proposed Amendment: “Where necessary in the light of resource and knowledge constraints of an SME that is a business partner of a company, Member States shall ensure that companies provide targeted and proportionate support. Support may include financial support, providing or enabling access to capacity building or training, or support in upgrading management systems or facilitating the upgrading of such systems in order to support the identification of adverse impacts.”
The Committee on Employment and Social Affairs has placed the draft opinion on the June 4 meeting agenda. Committee members have until June 3 to offer their own amendments. Given the amendments proposed in other committees, expect conflicting opinions to be stated. The draft opinion will be sent to the Committee on Legal Affairs for consideration.
The final vote in the Parliament is expected to take place on October 13. The Commission, Council, and Parliament will then meet to negotiate the final changes to the sustainability reporting requirements. They are expected to be approved in December.
