Dive Brief:
- The European Parliament voted Tuesday to approve a political agreement altering the scope and requirements of the European Union’s corporate sustainability reporting laws: the Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive.
- The co-legislating body for the European Union agreed to adopt the text of a deal the European Parliament and European Council reached last week, with 428 votes for the measure, 218 against and 17 members abstaining, according to a Tuesday release.
- Under the agreement, the CSRD would apply to EU-based companies with more than 1,000 employees and 450 million euros ($523 million) in revenue. The CSDDD would apply to companies in the bloc with more than 5,000 employees and 1.5 billion euros ($1.7 billion) in revenue.
Dive Insight:
The agreement would also alter the compliance thresholds for companies based outside of the European Union. The CRSD will apply to non-EU entities that generate over $523 million in revenue in the EU, as well as any subsidiary or branches of the company that generate over 200 million euros ($253 million) of revenue in the bloc. Non-EU entities that generate more than $1.7 billion in revenue in the bloc will be subject to the CSDDD under the deal.
Jörgen Warborn, a member of the European People’s Party, said in the release that Parliament’s approval of the deal represents “an important first step in the ongoing efforts to simplify EU rules.”
“Parliament has listened to the concerns expressed by job creators across Europe,” Warbon said. “Backed by a broad majority, today’s vote delivers historic cost reductions while keeping Europe’s sustainability goals on track.”
European legislators have worked to simplify the EU’s corporate sustainability laws since February, when the European Commission adopted a package intended to remove 80% of companies from the CSRD’s scope and streamline reporting requirements. The European Council and Parliament separately adopted reporting delays for the CSRD and CSDDD, while changes to the underlying reporting requirements were worked out.
The political agreement’s revised compliance thresholds are expected to remove approximately 90% of companies from the CSRD’s scope and around 70% of companies from the CSDDD, according to a blog from law firm Ropes & Gray.
The European Parliament initially voted to approve changes to the laws last month that would have led to even fewer companies being scoped into the CSRD. The legislative body initially decided on a 1,750-employee threshold for compliance, which KPMG Global Head of Corporate & Sustainability Reporting Mark Vaessen told ESG would have left just around 5% of the law’s original population.
The political agreement also includes a transition period for companies who were included in the first wave of CSRD reporting companies, but will fall out of scope due to the changes. The deal now awaits the full approval of the European Council, which is expected by early January, according to Ropes & Gray's analysis.
