In February, the European Commission adopted a proposal to drastically reduce sustainability reporting requirements in the European Union and a “stop the clock” directive to delay reporting requirements until 2028. On March 26, the Council of the EU approved the delay. Now, all eyes shift to the Parliament as they debate the proposal and consider amendments before an anticipated vote on April 3.
As part of the European Green Deal, the EU pushed through a trilogy of regulations aimed at controlling businesses’ climate related activities. The Taxonomy for Sustainable Activities that created a classification system for business and investors to know what activities are considered green or climate friendly was first adopted in 2020. In 2023, the EU adopted the Corporate Sustainability Reporting Directive to create requirements for businesses to report greenhouse gas emissions and other environmental, social, and governance actions. In 2024, they adopted the Corporate Sustainability Due Diligence Directive, adding additional reporting requirements, as well as legal liability, for companies in relation to their value chain.
However, by the summer of 2024, the tide was shifting on green initiatives. As the financial obligations in the directives became clear, the business community began to push for reforms. During the 2024 European Parliament elections, the burden on businesses became a major theme, with the European Green Deal taking the majority of the blame for the EU’s faltering economy. The elections resulted in a shift to the right, with environmentally focused parties losing seats.
The reform process began almost immediately behind closed doors. In November 2024, Ursula von der Leyen, president of the European Commission, publicly announced her intention to revamp the Taxonomy, CSRD, and CSDDD to reduce the burden on businesses. The Omnibus Simplification Package was officially adopted by the Commission on February 26.
The proposal included two directives. The first directive delays implementation of the CSRD and CSDDD until 2028, for fiscal year 2027. The second directive significantly reduces the number of businesses that must file sustainability reports under the CSRD, limiting it to large companies with companies with over 1,000 employees and €450-plus million in annual net turnover. It also reduces the enforcement mechanism of the CSDDD, limiting pecuniary damages and restricting who can bring civil action.
Under the standard processes of the EU, the proposal is sent to the Parliament and the Council for approval. Once those two bodies adopt the directive, the three send representatives into a negotiation session to work through any disagreements. The “trialogue” produces a uniform directive that goes back to the Parliament and Council for final approval.
In the Council, approval is dependent on the Committee of Permanent Representatives of the Governments of the Member States to the European Union, known as Coreper. On March 26, Coreper voted to approve the delay.
In Parliament, the process is more public and follows a traditional legislative process. In an effort to fast-track the vote, by invoking an urgent procedure that prioritizes the vote. The posted draft agenda for the April 1 Committee on Legal Affairs, known as JURI, includes the vote to fast-track under Rule 170. If the fast-track is approved, which it most likely will, a vote will be held to approve the “stop the clock directive.”
Insiders believe that the final vote in Parliament will take place on April 3. That limits debate and only gives opponents until April 2 to submit amendments. While climate activists are fighting against the delay in sustainability reporting, the “stop the clock” directive is very likely to pass with little changes, allowing for a quick trialogue and final adoption. Countries will have until the end of 2025 to put the changes into national law. The real battle will occur over the second directive to amend the CSRD and the CSDDD. The Commission has set a goal of adopting the roll back directive by the end of 2025.
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