EU: MEPs approve postponement of corporate sustainability reporting and due diligence directives

Following on from member state economy and finance ministers at the Council of the EU on 26 March, it was the turn of the European Parliament to validate without amendment the Commission’s proposal on the entry into force of the CSRD and CSDDD. On non-financial reporting, companies in the second and third waves (more than 250 employees and €50 million in turnover, then between 100 and 250 employees and at least €0.9 million in turnover, respectively) will not have to publish their first sustainability report until 2028 and 2029, marking a two-year postponement. Companies will also have an extra year to adhere to the due diligence directive after final adoption: application in 2028 for organisations with more than 5,000 employees and €1.5 billion in turnover, 2029 for those with more than 3,000 employees and €900 million in turnover, and 2030 for those with more than 1, 000 employees and €450 million in turnover. Even though far-right MEPs tried to postpone the two texts until 2040, the majority is large: 531 votes in favor and 69 against. The Council of the EU must now formally approve it for it to come into force.

Outlines of fundamental changes take shape.

The co-legislators will then have to tackle the biggest part of the omnibus package, which deals with lightening the burden on companies. Heads of state and government hope to see them ratified by the end of the year. In a conference organised by the conservative EPP group in the European Parliament, which is nevertheless in favour of the “simplification” advocated by the Commission, participants from all sides emphasised on 24 March that the obligations of companies should be linked to risks and consider the proposal presented on 26 February (due diligence requirements limited to direct suppliers) counterproductive in this respect. In addition, on 27 March, the EU commissioner for financial services sent a letter to the expert group responsible for defining non-financial indicators, EFRAG. She asked them to “significantly reduce the number of data points”, to “prioritise quantitative indicators” and to “distinguish more clearly between mandatory and voluntary standards”. These changes must be applied for the 2027 financial year at the latest. At the same time, the Dutch Financial Markets Authority is concerned about the Commission’s proposals (limiting auditing and obligations for companies with fewer than 1,000 employees) and is calling on companies to remain committed to “transparent and reliable” social and environmental reporting.