According to the latest report from the financial news website Eco Business, the proposed Omnibus by the European Commission may significantly weaken the enforcement of its two core sustainability regulations - the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). It is reported that the bill originally planned to be submitted by Executive Vice Chairman St é phane S é journ é and Committee Chairperson Ursula von der Leyen on February 26th may be postponed to March for release. It is predicted that the committee may consider reducing the scope of application of CSRD and CSDDD to a more basic level, especially CSRD, whose scope of application may be adjusted to be consistent with CSDDD, that is, companies with less than 1000 employees will no longer need to comply with the regulation for reporting, which will result in approximately 85% of companies currently governed by the regulation being excluded. In addition, the dual importance principle of CSRD may also face challenges and shift towards a single (financial) importance standard, which may require significant revisions to the European Sustainability Reporting Standard (ESRS). Meanwhile, the 11 key elements of CSDDD, including climate transition plans and responsibilities, will also face reconsideration. This series of changes has sparked widespread controversy among the business community, investors, and environmental organizations.
The core points of the dispute include
Raising the threshold for reporting:The original requirement for all large enterprises (with over 250 employees) and listed companies to disclose ESG data may now exempt some small and medium-sized enterprises and give them more autonomy in choosing disclosure frameworks, thereby reducing data comparability and consistency.
Reduction of due diligence responsibilities:CSDDD originally required companies to conduct mandatory due diligence on environmental and human rights risks in the global supply chain, but the latest draft may limit the scope of responsibility to "direct suppliers" and allow companies to avoid disclosing certain information on the grounds of "commercial sensitivity".
Softening of law enforcement mechanisms:The punishment authority of member states for non compliant enterprises may be limited, and there is a lack of unified EU level supervision mechanisms, which may lead to significant differences in the enforcement of regulations among different member states.
The reactions of various stakeholders are as follows
business:Some industry groups support the flexibility adjustment of regulations, believing that excessive supervision will increase the compliance costs of enterprises.
investor:Pension funds and ESG asset management agencies have criticized this move as weakening market transparency and hindering the development of sustainable investment decisions.
Non governmental organizations:Environmental organizations warn that the EU's green agenda is being eroded by business lobbying.
These potential policy changes may have the following impacts
Enterprise Practice:If regulations are weakened, companies' ESG investment may shift from "compliance driven" to "voluntary action," thereby slowing down the pace of low-carbon transformation.
Investor risk:Non standardized data will increase the difficulty of ESG rating, thereby affecting the climate risk assessment of investment portfolios.
Global benchmark effect:If the EU regresses in this area, it may affect the policy-making ambitions of other regions, such as the climate disclosure rules of the US Securities and Exchange Commission.
In depth analysis shows that this policy adjustment reflects the balance between "economic competitiveness" and "climate ambition" within the EU. Under the dual pressure of energy crisis and industrial relocation, the EU is attempting to stabilize the economy by reducing the burden on businesses, but this may come at the cost of sacrificing the credibility of the European Green Deal. In the long run, fragmented ESG rules may exacerbate the risk of greenwashing, forcing investors to rely more on private standards such as the International Sustainability Standards Board (ISSB) and the Sustainable Accounting Standards Board (SASB) to fill regulatory gaps.