The European Parliament and EU member state negotiators have reached a provisional deal to cut down on EU rules on sustainability reporting and due diligence requirements for companies.
“Today we delivered on our promise to remove burdens and rules and boost EU’s competitiveness,” said Denmark’s Minister for European affairs Marie Bjerre, for the EU presidency: “This is an important step towards our common goal to create a more favourable business environment to help our companies grow and innovate.”
According to the informal agreement, social and environmental reporting will only be required for EU companies employing on average over 1,000 employees and with a net annual turnover of over €450 million. The net turnover threshold has also been increased for non-EU companies to €450 million generated in the EU for sustainability reporting.
Co-legislators also agreed on further simplification of the reporting requirements which should become more quantitative, while sector-specific reporting would become voluntary. They ensured smaller companies with under 1,000 employees are protected from shifting responsibility for reporting, as the updated rules allow them to refuse reporting information beyond what is set out in the voluntary standards.
The Commission is also to create a digital portal for businesses with access to templates and guidelines on EU and national reporting requirements.
According to the agreement, only large EU corporations with more than 5,000 employees and a net annual turnover of over €1.5 billion will need to carry out due diligence to minimise their negative impact on people and the planet. The rules will also apply to non-EU corporations with a turnover in the EU above the same threshold. Companies should adopt a risk-based approach in their chain of activities and should refrain from requiring unnecessary information from companies not included in the scope.
Businesses within the scope of the revised due diligence rules will no longer need to prepare a transition plan to make their business model compatible with the Paris Agreement. They will remain liable at national rather than EU level for non-compliance and could face fines of up to 3% of the company’s net worldwide turnover, the guidance on which will be provided by the Commission and member states.
“We have secured a very good compromise”, said Parliament’s rapporteur Jörgen Warborn MEP: “We are making the sustainability rules easier to comply with, delivering historic cost reductions for businesses, and still delivering for European citizens. This is a win for competitiveness and a win for Europe.”
The Parliament’s Legal Affairs Committee will vote on the provisional agreement on 11 December, with the Parliament as a whole voting on it during its December plenary session in Strasbourg.
