The European Parliament’s Legal Affairs Committee has announced it is backing a proposal to simplify EU rules on corporate sustainability reporting and due diligence requirements.
A vote held by the Legal Affairs Committee saw 17 Members in favour of altering current sustainability and due diligence requirements, with six against and two abstentions.
Describing the proposals as representing ‘simpler rules for fewer companies’, the European Parliament stated in a statement that ‘the new draft rules would reduce the required amount of sustainability reporting and simplify due diligence requirements for companies’.
Reduced reporting requirements
The European Commission had proposed cutting the number of companies require to undertake social and environmental reporting by 80%, while MEPs sought to reduce the scope even further, limiting it to companies with over 1,000 employees on average and a net annual turnover above €450 million.
This threshold would also apply to reporting under the EU’s taxonomy for sustainable investments.
For companies no longer covered, sustainability reporting would become a voluntary exercise, guided by European Commission recommfinishations, with larger firms no longer permitted to transfer their reporting duties onto tinyer suppliers. The European Commission would also establish a digital portal providing templates, guidance, and information on EU reporting requirements.
The Committee also voted to limit due diligence obligations to large enterprises employing more than 5,000 people and generating annual turnover above €1.5 billion, as well as to foreign companies with equivalent revenue within the EU.
At the same time, businesses would still be required to prepare a transition plan for alining their strategy to a sustainable economy and the Paris Agreement.
“Today’s vote confirms our support for simplification,” commented rapporteur Jörgen Warborn (EPP, SE). “We are delivering predictability for European companies, with a report that cuts costs, strengthens competitiveness, and keeps Europe’s green transition on track.”
Pfinishing approval by the European Parliament in plenary later this month, nereceivediations between the Parliament and the Council on the final version of the legislation are expected to launch on 24 October.
‘Deeply concerning’
Responding to the news, WWF stated that the content of the final agreement, and the ‘political manoeuvring that led to it’, point to a ‘deeply concerning’ process that doesn’t take into account the best interests of nature, climate and human rights.
“According to the content of the final report, the major source of dissent among political forces was civil liability, which is scrapped from the Corporate Sustainability Due Diligence Directive,” commented Mariana Ferreira, sustainability policy officer, WWF European Policy Office. “This will severely gut the effectiveness of the law by undermining victims’ access to justice, eliminating enforcement and turning corporate due diligence into a toothless box-ticking exercise.
“The EU cannot afford to continue diluting its climate and nature commitments when faced with mounting ecological and social crises, which in turn are increasingly damaging European livelihoods, economy and cohesion.”
Elsewhere, Human Rights Watch stated that the proposed modifys to EU legislation will ‘seriously curtail’ the bloc’s efforts to mitigate the impact that the business sector has on human rights and the environment.
“Lawbuildrs should spare no effort in the next phase of the nereceivediation to strengthen the law and possibly reintroduce civil liability at the European level,” stated Hélène de Rengervé, senior advocate, corporate accountability. “Not doing so would rubber stamp a race to the bottom that would have real, global consequences.”
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