The European Parliament has approved a package aimed at simplifying corporate sustainability reporting and easing due diligence requirements for European businesses. The vote, which took place on Thursday, saw 382 MEPs in favour, 249 against, and 13 abstentions. The bill now heads to negotiations with member states before final approval.
The legislation is part of a broader EU effort to reduce regulatory burdens on companies. The European People’s Party (EPP) teamed up with the European Conservatives and Reformists (ECR) and far-right Patriots for Europe (PfE) to pass the law, following a vote on several amendments.
Corporate Sustainability Reporting Simplification
The new law simplifies corporate sustainability reporting by raising the threshold for companies subject to due diligence requirements. Under the revised rules, only companies with more than 5,000 employees and a net annual turnover of over €1.5 billion will be required to comply. This represents a significant change from the original provisions, which applied to companies with more than 1,000 employees and a yearly turnover of €450 million.
The Parliament also removed fines of up to 5% of a non-compliant company’s net turnover. Instead, the law now refers to “appropriate levels” of penalties, leaving it to member states to decide. According to Jörgen Warborn, the Swedish EPP rapporteur who drafted the law, this change aims to provide more flexibility for businesses.
However, the decision to ease due diligence requirements has sparked concerns among some stakeholders. The original Corporate Sustainability Due Diligence Directive aimed to ensure that companies operating in the EU adhere to high sustainability and human rights standards. By raising the threshold, some fear that smaller companies may escape scrutiny, potentially leading to environmental and social harm.
EPP’s Shifting Alliances
The EPP’s decision to team up with right-wing parties to pass the law is not an isolated incident. In recent months, the EPP has occasionally partnered with the ECR, PfE, and Europe of Sovereign Nations (ESN) on various issues, particularly those related to climate and environment. This trend has raised questions about the EPP’s strategy and its implications for EU policy-making.
The emergence of an alternative majority in the European Parliament, comprising the EPP and right-wing parties, marks a significant shift in the legislature’s dynamics. This development could have far-reaching consequences, potentially influencing the passage of future legislation on key issues such as environment and migration.
Meanwhile, in a separate vote during the same session, the centrist majority backed the revision of the EU’s climate law, setting a target to cut 90% of greenhouse gas emissions by 2040. The change was approved with 379 votes in favour, 248 against, and 10 abstentions, following an agreement struck by the EPP, Socialists and Democrats (S&D), Renew Europe, and the Greens/EFA groups.
As the EU continues to navigate complex policy issues, the EPP’s dual-track approach is likely to remain a key factor in shaping the legislative landscape. The outcome of the ongoing negotiations between the Parliament and member states will be crucial in determining the final shape of the corporate sustainability reporting law. For now, businesses and stakeholders will be watching closely to see how these developments unfold and what implications they may have for the future of sustainability reporting in the EU.
