The European Commission proposed in February a number of simplifications to the obligations on business regarding corporate sustainability reporting. On Thursday, 3 April, members of the European Parliament voted in favour of the European Commission’s proposal to delay the implementation of corporate sustainability reporting and due diligence rules while negotiations on their content are ongoing. Last week, EU country representatives in the Council of the EU also backed the proposal, which means all three co-legislators are aligned.
Under the new proposal, the Commission will remove approximately 80 per cent of companies within the framework of the Corporate Sustainability Reporting Directive (CSRD). Under the current law, companies with 250 employees or more, are required to engage in sustainability reporting. The proposal aims to streamline regulations for businesses in the EU by raising the threshold to companies with over 1,000 employees, reducing bureaucratic hurdles. The Directive will exclusively apply to large firms which have a higher likelihood of affecting people and the environment.
The CSRD, in its current form, affects the value chains of smaller firms in several ways, even if they are not directly obligated to report under the Directive. This stems from Articles 19(a)(3) and 29(a)(3) of the CSRD, which require companies to supply information, not just about their own activities, but also about their “upstream and downstream value chain”. Consequently, firms obligated by the Directive may demand Environmental, Social, and Governance data from their smaller suppliers, contractors, or business partners. The proposed changes to the CSRD will eliminate this undue bureaucratic strain on SMEs within their value chains.
Furthermore, the omnibus proposal introduced a “Stop the Clock” concept. This would delay the reporting requirements by two years for companies subject to the CSRD, which are scheduled to report for the first time in 2026 or 2027. The proposed amendments to the Corporate Sustainability Due Diligence Directive (CSDDD), originally set to take effect by July 2026, will be delayed by 12 months. This will substantially ease compliance requirements for affected businesses. The aim of the delay is to relieve companies from having to comply with the laws while negotiations over how to simplify them are ongoing.
Peter Burke, Minister for Enterprise, welcomed the Commission’s proposal, stating that the extent of the administrative burden arising from the CSRD was “excessive”. Minister Burke expressed his strong support for President von der Leyen’s simplification agenda, which is geared towards enhancing the competitiveness of businesses in the EU. In due course, Minister Burke will amend the existing Irish legislation governing the CSRD to provide clarity and reduce the scope of companies affected by the Directive. He committed to accelerating the implementation of the “Stop the Clock” mechanism, as well as the proposals within the wider Omnibus.
