The European Parliament has decided to delay the deadlines for submitting applications for new EU regulations pertaining to sustainability reporting and due diligence.
On Thursday, the EU lawmakers granted themselves additional time to work out a way to exempt smaller companies from sustainability reporting requirements that the European industry claims disadvantage them.
In addition to the directive that the Parliament approved that delays the implementation of reporting and due diligence regulations, the package also contains another directive that modifies the scope and content of sustainability reporting and due diligence requirements.
Companies must lessen their adverse effects on people and the environment in accordance with the new due diligence regulations. Member states will have until July 26, 2027, to incorporate the regulations into their national laws.
Negotiations will focus on proposed changes to EU laws, including exempting 80% of companies from green reporting rules and changing due diligence laws to require supply chain assessments every five years.
The three business waves:
The first wave of businesses to be impacted, which includes non-EU companies with a turnover above €1.5 billion in the EU and EU companies with more than 5,000 employees, will also be eligible for the one-year extension. The regulations will only be applicable to these businesses starting in 2028.
For the second wave of businesses, which includes non-EU businesses with a turnover above €900 million and EU businesses with more than 3,000 employees, the application deadline will be the same.
There will be a two-year application delay for the second and third waves of businesses that are subject to the sustainability reporting directive.
Large companies with over 250 employees will report on their social and environmental measures in 2028, while listed small and medium-sized enterprises will provide this information one year later.
The “Simplification Omnibus” amendments, which the European Commission proposed in February, would exempt thousands of smaller European companies from the EU’s sustainability reporting requirements.
The latest initiative was a reaction to EU industry’s grievances that it is unable to compete with rivals in the US and China, where President Trump is weakening regulations and levying tariffs on imports.
Our take:
Even though the bloc is regarded as the world leader in sustainability policy and regulations, this reversal may make it more difficult for investors to obtain climate data and transition funds. The softening of these EU policies is due to concerns about competitiveness, as anti-ESG laws in the US have become more stringent. However, Asia Pacific is stepping up, fortifying its own sustainable policies and bridging the Western gap.
