|
Today, the Council’s presidency and European Parliament’s negotiators reached a provisional agreement to simplify sustainability reporting and due diligence requirements to boost EU competitiveness. The agreement simplifies the directives on corporate sustainability reporting (CSRD) and corporate sustainability due diligence (CSDDD) by reducing the reporting burden and limiting the trickle-down effect of obligations on smaller companies. Next steps The provisional agreement must be now endorsed by the Council and the European Parliament before it is formally adopted by the two institutions. In more detail: |
|
|
|
Corporate sustainability reporting directive On the CSRD, the compromise sees:
Corporate sustainability due diligence directive Scope: While the CSDDD’s scope was not covered by the Commission’s proposal, the provisional agreement increases the thresholds to 5,000 employees and €1.5 billion net turnover. The co-legislators considered that such large companies have the biggest influence on their value chain and are best equipped to make a positive impact and absorb the costs and burdens of due diligence processes. Identification and assessment of adverse impacts The Commission’s proposal limits the further assessment of the identification phase to the company’s own operations, those of its subsidiaries, and those of its direct business partners. The provisional agreement also removes this limitation. Instead, companies can focus on the areas of their chains of activities where actual and potential adverse impacts are most likely to occur. To provide companies with flexibility, when a company has identified adverse impacts equally likely or equally severe in several areas, they are given the ability to prioritise assessing adverse impacts which involve direct business partners. Furthermore, companies should no longer be required to carry out a comprehensive mapping exercise but instead conduct a more general scoping exercise. Companies are supposed to base their efforts on reasonably available information, which will reduce the trickle-down effect of information requests on smaller business partners. Climate transition plans The obligation for companies to adopt a transition plan for climate change mitigation has been removed. Civil liability, penalties and transposition The provisional agreement removes the EU harmonised liability regime and the requirement for member states to ensure that the liability rules are of overriding mandatory application in cases where the applicable law is not the national law of the member state. A review clause on the need for an EU harmonised liability regime has been inserted. When it comes to penalties, it was agreed on a maximum cap of 3% of the company’s net worldwide turnover with the Commission issuing the necessary guidelines in this regard. The transposition is postponed by a further year to 26 July 2028. Companies will have to comply with the new measures by July 2029. Action: Gafta will continue to monitor developments. Full details in the attached legislation and Council Press release: |
Disclaimer
All Gafta Circulars and Notices are provided to Members purely for the purposes of information. We have not taken any steps to verify the accuracy of the information provided and, accordingly, Members must obtain their own independent professional advice as to its content and effect. We cannot accept any liability, howsoever arising, for any loss or damage which may be caused by any reliance on any information contained in a Gafta Circular or Notice.