The future of sustainability reporting in the European Union is in flux as the Parliament debates an omnibus bill aimed at “reducing the burden on businesses.” The Commission proposed Omnibus Simplification Package greating reduces the requirements in both the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directives. As the legislative process unfolds in the Parliament, various committees are drafting opinions in an attempt to influence the final bill.
Reforms to the CSDDD and the CSRD were proposed by the Commission in February, then sent to the Council and the Parliament for approval. In the Parliament, the Committee on Legal Affairs, known as JURI, is the primary committee to produce the legislation that will be sent to the full Parliament for a vote. However, related committees will draft opinions to be considered by JURI during drafting the process.
Committee opinions will be drafted by Economic and Monetary Affairs, known as ECON, Environment, Climate and Food Safety, known as ENVI, Foreign Affairs, known as AFET, International Trade, known as INTA, and Employment and Social Affairs, known as EMPL.
In each committee, a rapporteur will lead the drafting process. Shadow rapporteurs are designated by political groups to represent them in the debate process. While the rapporteurs and shadow rapporteurs will lead the discussions, committee members are able to submit individual proposed amendments. Committees are slowly releasing the proposals as the deadline for submission passes. So far, ECON published 514 proposed amendments and ENVI posted 473. EMPL posted a draft opinion with 49 proposed amendments, but has not posted the member proposals yet.
The amendments change the language of the Omnibus Simplification Package as proposed by the Commission. The volume of amendments is less a function of diverse opinions as it is a procedural step. Rather than offering sweeping amendments that encompass the overall vision of a MEP or Party, every change to every subparagraph is offered in a separate amendment. The EMPL draft opinion demonstrates how one political party, The Left, produced 49 proposed amendments in a single proposal.
During the drafting process, the issue is discussed in committee meetings, before a final draft is voted on. A far cry from the spirited debates witnessed in some legislative bodies, the Parliament’s committee meetings are scripted affairs with a set order. Most members read prepared statements devoid of passion, others inject moments of strong advocacy. The discussions in the meetings serve as an opportunity for committee members to make public statements, rather than a place where negotiations take place. However, they provide valuable insight. Both ECON and EMPL held regular meetings on June 4 that included the topic of the omnibus.
Committee on Economic and Monetary Affairs
The ECON meeting is available on the European Parliament’s website, starting at 15:47. The deadline for committee members to submit amendments passed and the committee has entered into the drafting stage. Given the high volume of proposed amendments, and the polarized views, it is not surprising that members are in conflict over the direction of the committee’s opinion. Notably, the draft opinion has not been circulated publicly, but it appears members of the committee have seen a copy.
Janusz Lewandowski, of the Group of European People’s Party, is the rapporteur for the ECON committee’s opinion. He was originally elected of the European Parliament in 2004, serving until 2007. From 2009 to 2014, he was a member of the Commission. He returned to the Parliament in 2009, where he continues to serve. As a result, he has a long institutional memory of developments with the EU.
Lewandowski invoked that experience in his presentation to the committee. He noted that the omnibus package to reform the CSRD and the CSDDD is only the first of a series of proposals coming “to make the business environment in Europe more business friendly.” He painted a picture of Europe seeing increased red tape and being less competitive. He claimed that the European Globalisation Adjustment Fund for Displaced Workers has been “activated more and more often to compensate for the loses of jobs in Europe.”
He went on to state that the EU “economy is growing slower than our competitors. The over regulation is hampering the ability to innovate and invest… Businesses must be focused on business and not reporting… Simplification does not mean abandoning of our climate and environmental sensitivity. Our environmental ambitions should remain the most climate friendly content and most social content on our planet. We have mistaken…our commitment to the European Green Deal with over regulation… Being the world champion in sustainability does not mean that we need to be the world leader in reporting bureaucracy.”
Looking at the proposed scope, he wants alignment between the CSRD and the CSDDD. Further, he stated that he agrees with changes that limit application to more than 3000 employees with net turnover of €450 million, because businesses of that size have the resources to meet the challenges of strong reporting requirements. He also wants clarification that the Taxonomy is voluntary. Looking at sustainability reporting standards, he noted that there are currently 1,000 data points, a standard that he believes is far too cumbersome for businesses.
Other members of the committee, serving as shadow rapporteurs, were given the opportunity to comment. Their statements aligned with arguments made in their previously filed amendments.
Francisco Assis, of the Group of the Progressive Alliance of Socialists and Democrats, raised objections to undoing the CSDDD within a year of initial passage. He stated he is favor of reasonable changes, not gutting the legislation. He noted that only 1000 companies will have to comply with the legislation. He state his party welcomes small changes to the thresholds and changes to the impacts on SMEs. Assis took issue with Lewansowski’s approach as rapporteur, noting that none of the S&D’s amendments have been considered. He asked for a different approach, or his party will not be able to sign off on the opinion.
Pierre Pimpie, of the Patriots for Europe Group, called for the full repeal of the CSRD and the CSDDD. He said he did not understand why the Parliament is debating details, despite seeing the “disastrous” effect the original directives are having. He stated, through a translator, “we cannot sacrifice our businesses in the name of green religion.”
Giovanni Crosetto, of the European Conservatives and Reformists Group, stated their support for the omnibus proposal and called for further simplification. He also called for the repeal of the CSDDD. He argued that the data should not be made publicly available where it could cause additional legal liabilities.
Pascal Canfin, of Renew Europe, who is also a shadow rapporteur for JURI, criticized the direction taken by the EPP. Addressing the politics, he said, through a translator, it was a choice between “a simplification process that is pro-European or will the EPP side with the extreme right as part of the Venezuela coalition.”
Speaking on behalf of Renew, he stated they are in favor of simplification in terms of audits and holdings. However, they do not want to undo the CSRD or CSDDD. They want businesses to be on the same page, using the same grammar and standards, to describe their activities.
Manon Aubry, of The Left, offered the most animated argument. She stated, through a translator, that the process was a sad one. “Paragraph by paragraph, chapter by chapter, you are gutting what we adopted just a year ago… Hours and hours, days and nights, were spent to try to reach a compromise. We barely adopted it, and now it is being called into question.”
She directly challenged Lewansowski’s previous statements on the cost for businesses, saying “what about the cost for workers? What about the pollution that is caused? What about those that are exploited to death by multi-internationals who push the logic of profits to the very end?”
“The due diligence directive was supposed to end impunity. It was supposed ensure that companies are finally held legally accountable for their environmental damage and for their human rights abuses.”
She stated that The Left is against the proposed changes, pointing to their proposed amendments that leave the CSRD and CSDDD intact.
Chrisophe Gomart, of the European People’s Party, stated that people are starting to get that Europe is in an economic tailspin. In 2008, GDP in Europe was the same as the GDP in the U.S. Now, it is 40% less. He blamed this on over regulation of business. He called not only for simplification of the CSRD and other regulations, but also the full repeal of the CSDDD.
Lewansowski was given the closing statement. He stated that there appears to be agreement on simplification. He stated that “Europe will remain the most socially sensitive and most climate sensitive on the planet”, but they must try to make Europe more competitive. He stated that the work to find a compromise on the draft opinion is difficult, but he remains optimistic that reasonable compromise can be obtained.
Based on comments by the committee chair, it appears the final vote on the ECON opinion will occur on July 15.
Committee on Employment and Social Affairs
The future of the omnibus simplification package was also discussed at the June 4 EMPL committee meeting. The tone was drastically different from ECON, as the committee chair Li Andersson, of The Left, also serves as the rapporteur for the opinion. The exchange is available on the Parliament’s website starting at 9:34.
Andersson took a different approach, releasing her proposed draft as part of the meeting documents. However, the draft is clearly her vision, and was released before the deadline for committee members to offer their amendments. Members had until June 3 to submit proposed amendments, but those have yet to be made public.
Andersson began the discussion, stating that she hoped the EMPL opinion will have a significant impact on the final JURI proposal. She echoed sentiments that simplification is needed, but she disagrees with the Commission’s proposal. She said the focus of EMPL should be on “the risk of weakening victim’s protection… in this case, victims of force labor or child labor.” She also wants to focus on the Commission’s proposal to exclude parts of the value chain in the CSDDD.
Maravillas Abadía Jover, of the EPP, called for harmonization of sustainability regulations and highlighted the need to protect SMEs. Mariateresa Vivaldini, of the ECR, also addressed the impact of red tape on SMEs. She called for clarity and consistency in the regulations.
Nikola Bartůšek, of PfE, stated that the EU needs to support “production, growth, prosperity, and jobs. Now more than ever, it is crucial that we cut back the bureaucracy that is suffocating our businesses across Europe… We were right when we warned that over regulation in the name of sustainability is a heavy burden on our companies, our workers, our families, and all European citizens.”
Jana Toom, of Renew, acknowledged calls by businesses relating to the overly burdensom and costly nature of the current sustainability reporting requirements. However, she stated that simplification must be done in a way that the objectives of the CSRD and CSDDD can be achieved.
She took issue with three changes to the CSDDD proposed by the Commission. First, the removal of the requirment for companies to terminate a “business relationship in case of severe misconduct.” She stated that it must be assumed some of these cases of severe misconduct include child labor and must stay in the directive.
Second, is “the removal of the provision in producing a EU-wide, hamonized, civil liability regime.” She argued that removal of the standard will result in each member stating hagint their own civil liability requirments, resulting in 27 jurisdictions for businesses to comply. She states this will allow for forum shopping, or a tactic by attorneys to bring litigation in courts where they are likely to get the best results.
Third, she objected to the reduction of the scope of responsibility along the value chain. The current proposal calls for a limitation to direct partners, while the original CSDDD included indirect business parters as well.
Andersson did not provide a timeline for when a vote may occur on the EMPL opinion. However, it is most likely to occur at either the June 25 or July 14 meetings.
The opinions by the committees will be sent to JURI for consideration. JURI is expected to approve the changes to the Corporate Sustainability Due Diligence Directive and the Corporate Sustainability Reporting Directive on Septmeber 13.
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