EU-Commission proposes simplifying rules on sustainability

The European Commission has introduced a new set of proposals aimed at streamlining EU regulations, enhancing competitiveness, and increasing investment opportunities. This initiative marks significant progress in fostering a business-friendly environment that supports the growth, innovation, and job creation of EU companies.

Sustainability reporting will be more accessible and efficient by streamlining requirements under the Corporate Sustainability Reporting Directive (CSRD) and the EU Taxonomy. Key changes include:

• Narrowing the CSRD Scope: Around 80% of companies will be removed from CSRD obligations, limiting reporting to the largest firms with the most significant environmental and social impact.
• Protecting Smaller Businesses: Large companies reporting requirements should not have a negative impact on smaller companies in their value chain
• Postponing Reporting Deadlines: Companies currently under CSRD, set to report in 2026 or 2027 will have their deadlines extended by two years until 2028.
• Allowing Partial Taxonomy Alignment: Optional reporting on partially EU Taxonomy aligned activities to foster a gradual transition over time
• Introducing a Financial Materiality Threshold: Taxonomy reporting templates will be reduced by approximately 70%, simplifying compliance.
• Easing “Do No Significant Harm” (DNSH) Criteria: The most complex DNSH requirements, especially those related to pollution and chemical use, will be simplified.

The European Commission is also streamlining sustainability due diligence requirements to reduce complexity and costs for businesses while ensuring responsible practices. Key changes include:

• Focusing on Direct Business Partners: Systematic due diligence will primarily apply to direct partners, with periodic assessments reduced from annually to every five years, except for necessary ad hoc reviews.
• Easing Burdens on SMEs: Large companies will have limited ability to request extensive information from SMEs and small mid-caps within their value chains.
• Adjusting Civil Liability Rules: The EU will remove specific civil liability conditions while ensuring victims retain the right to full compensation, preventing over-compensation claims.
• Extending Compliance Deadlines: Large companies will have one additional year until July 26, 2028.

Revisions to Carbon Border Adjustment Mechanism (CBAM) aim to reduce administrative burdens while maintaining its effectiveness. Key changes include:

• Exempting Small Importers: Importers handling less than 50 tonnes of CBAM goods annually—mostly SMEs—will be exempt, removing obligations for 90% of importers while still covering over 99% of emissions.
• Simplifying Compliance for Larger Companies: Streamlined authorization, emissions calculation, and reporting rules will ease CBAM obligations for those still in scope.

These reforms aim to balance regulatory efficiency with sustainability and fairness in global trade.

Next Steps

The legislative proposals will now be reviewed by the European Parliament and the Council for approval and adoption. The changes to the CSRD, CSDDD, and CBAM will take effect once an agreement is reached and they are published in the EU Official Journal.

The Commission urges lawmakers to prioritize this package, particularly the postponement of certain CSRD disclosure requirements and the CSDDD transposition deadline, as these address key stakeholder concerns.

Additionally, the draft Delegated Act amending the Taxonomy Regulation will be finalized after public feedback and will come into effect at the end of the scrutiny period by the European Parliament and the Council.