The European Parliament is diluting the Corporate Sustainability Due Diligence Directive (CSDDD), whilst the implementation of the EU Deforestation Regulation (EUDR) is likely to be delayed by another 12 months.
The European Parliament’s Committee on Legal Affairs has voted to raise the reporting thresholds for the Corporate Sustainability Reporting Directive (CSRD) and the CSDDD, reducing the number of companies required to comply.
Under the new proposal, the CSDDD would apply only to companies with 5,000 or more employees and at least EUR 1.5 billion in turnover, compared with the original threshold of 1,000 employees and EUR 450 million. The revised framework significantly narrows the law’s scope, which was adopted in 2023 to compel large companies to mitigate environmental and social harm or face fines of up to 5% of global turnover.
The CSRD directive had originally applied to firms with as few as 50 employees and EUR 8m in turnover, with non-EU companies expected to start reporting by 2026. The updated rules are expected to exempt around 80% of businesses from the reporting requirements. Under the CSRD, companies are required to publish an annual sustainability report detailing information such as greenhouse gas emissions and water use. In February, the European Commission delayed the compliance deadline until 2028.
The European Union is also looking to postpone the implementation of the EUDR for a second time, pushing back implementation by a further year due to IT system readiness issues.
Originally scheduled to take effect on December 30, the regulation would have required operators selling commodities such as soya, beef, and palm oil into the EU to prove their supply chains were not linked to deforestation. The delay follows strong opposition from trade partners including Brazil, Indonesia, and the US, as well as concerns from EU member states about compliance feasibility.
Environment Commissioner Jessika Roswall confirmed the decision was driven by risks of IT system overload, which could disrupt trade flows if launched prematurely. She rejected claims the move was connected to US political pressure.
The law, which aims to curb the 10% of global deforestation attributed to EU consumption, has been contested both by industry groups warning of export losses and by environmental campaigners, who criticised the latest postponement as undermining climate action. The European Parliament and member states must still approve the delay.
EI Comment: The EU has been introducing new sustainability regulations as part of its Green Deal. However, it has been receiving much resistance from political parties and industry groups, leading to ‘green backsliding’. The dilution of CSDDD and CSRD are examples of this. The EU Green Claims Directive has also been put on hold. As right-wing populism increases in parts of Europe, economic growth appears to be prioritised over such sustainability regulations.
