EU’s corporate disclosure mandate set to be scaled back, reports say

The European Union’s Omnibus Simplification Package, designed to streamline corporate disclosure mandates such as the Corporate Sustainability Reporting Directive, is due to be released to the public later this week. But a proposed amendment leaked over the weekend shows a marked scaling back of corporate disclosure requirements.

The omnibus package, announced in mid-November, is designed to simplify the EU’s three corporate emissions data requirements to reduce reporting burdens for affected companies.

The proposed amendment, from the European Commission, has led to public pushback from industry professionals who charge EU policymakers with backpedaling. The leak was first reported by Politico.

“If confirmed, this is reckless,” said Maria van der Heide, head of EU policy at ShareAction, in a LinkedIn post. “This is not simplification, it is pure deregulation.”

Reporting requirements

Businesses operating in Europe are mandated to comply with multiple reporting standards:

• The Corporate Sustainability Reporting Directive (CSRD): Requires covered companies to disclose their ESG risks, impacts and opportunities.
• The EU Taxonomy Regulation: Seeks to prevent greenwashing by requiring companies to disclose the details related to purported sustainability company activities.
• The Corporate Sustainability Due Diligence Directive: Requires businesses to explain how they handle human rights and environmental impact in their value chains.

“Concerns about the cost to businesses are understandable,” said Julien Denormandie, chief impact officer at Sweep and former French Minister of Agriculture, in an email, “However, these investments should be viewed in the context of long-term benefits.”

So, what does the European Commission deem reasonable to condense in favor of reporting efficiency?

CSRD-light

The qualifying standards deciding whether a company must comply with CSRD are relaxed compared to the original law. If adopted, the amended package would reduce the number of companies mandated to comply with CSRD by around 85 percent, focusing only on companies with 1000 employees or more. The current employee size base is 250.

Additionally, small and medium sized entities — companies or subsidiaries with fewer than 250 employees — both within and outside of the EU are completely removed.

“Overall, this would probably leave around 10 percent of the largest firms (maybe 5,000 or so) within the scope,” said Maximilian Müller, a professor of financial accounting at the University of Cologne, on LinkedIn.

Many of those firms left out of the scope will be U.S.-based multinationals, according to an analysis by law firm Ropes & Gray.

Stripped-down directive

The omnibus package will also cut substantive reporting requirements for the Due Diligence Directive.

• The proposed amendment would delay the implementation of the directive, from July 2026 to January 2027.
• It would strip the directive down to its foundation. Before, the standards required companies to conduct human rights and environmental risk-based due diligence both within their direct supply chain and subsidiaries. The revision would only require assessments for direct stakeholders.
• It also eliminates the current requirement for companies to create and enact a climate transition plan, among other proposed rollbacks.

The finalized version of the omnibus package will be released Wednesday and Trellis will be following and reporting on changes to EU corporate emissions disclosure requirements.