Due diligence only for large companies, first EU Parliament yes to Omnibus sustainability package

Brussels – The approval of the package to simplify corporate sustainability rules proposed by the European Commission last February is progressing. Today, the EU Parliament gave the first green light to the draft regulation, calling for the reporting rules to apply to companies with more than 1,000 employees and an annual net turnover of at least €450 million, and for supply chain monitoring obligations to apply only to large companies with more than 5,000 employees and a turnover of more than €1.5 billion per year. 

The stalemate of the last few weeks was resolved with the “take it or leave it” of the European People’s Party, which threatened its allies in the majority—the Socialists and Liberals—to turn to the extreme right-wing groups if they did not accept the regulatory simplifications to two of the files symbolic of that Green Deal on which Brussels is now taking decisive steps backwards. The text, on which the pro-European majority reached agreement on Wednesday, 8 October, was approved by the European Parliament’s legal affairs committee (JURI) by 17 votes to 6 with 2 abstentions. 

The EU Parliament wants to go even further than what the Commission proposed. The EU executive was aiming to reduce by 80 per cent the number of companies required to submit social and environmental reports under the Corporate Sustainability Reporting Directive (CSRD), while the text approved today in JURI calls for a further reduction in scope, affecting only companies with more than 1,000 employees on average and an annual net turnover of more than €450 million. For excluded companies, reporting would remain voluntary. 

Regarding the Corporate Sustainability Due Diligence Directive (CSDDD), which imposes a series of obligations and responsibilities on companies concerning the environment and human rights throughout the supply chain, the EU Parliament has also raised the bar. Basically, it requires them to apply only to large companies with more than 5,000 employees and an annual net turnover of more than €1.5 billion. They are the same numbers indicated by the member states, with which the European Parliament—after the green light from the chamber—will have to negotiate the final text of the simplification package. 

The rapporteur, People’s Party MEP Jorgen Warborn, said that in this way the EU Parliament is “ensuring predictability for European companies,” calling in short for “reducing costs, strengthening competitiveness, and keeping Europe’s green transition on track.” While the text preserves mandatory climate transition plans and maintains a relatively robust due diligence framework for large companies, it decisively increases their size threshold—excluding more than 80 per cent of them—and removes several liability provisions. 

As the NGO ShareAction pointed out, “everything is being watered down.” The organisation—despite “some positive elements that should not be overlooked”—said it was “deeply concerned about the political direction and what it entails in terms of implementation and adoption by companies.” For Mario Furore, MEP for the 5 Star Movement, “the Omnibus package approved today clearly responds to the demands of powerful lobbies that do not have the general interest at heart.”