The European Commission has launched its formal proposals for an ‘omnibus’ to streamline its sustainable finance regulation.
The plans are broadly aligned with leaked documents, reported by IPE earlier this week.
Speaking at a press conference in Brussels, Maria Albuquerque, commissioner for Financial Services and the Savings and Investments Union, said the Commission wanted to preserve the European Union’s ‘double materiality’ approach, meaning companies would still be required to disclose information about their impacts on climate and other sustainability objectives.
“What we are trying to find here is the right balance. So we want [to preserve] the Green Deal objectives, but we want to make this proportionate and useful,” she told journalists.
“The implementation of many of these reporting requirements […] have proven to be too burdensome and in some cases disproportionate.
Albuquerque said “overall circumstances had changed” and there had been “unintended consequences” for the EU’s sustainable finance regulation.
“Things we thought would be very important turn out to be less useful,” she claimed, adding: “I don’t think there is a conflict here.”
CSRD
Specifically, the Commission wants to slash the Corporate Sustainability Reporting Directive (CSRD) so that it will also apply just to Europe’s biggest companies – those with more than 1,000 employees and €450m in annual turnover.
This will give it the same scope of the Corporate Sustainability Due Diligence Directive (CS3D).
“What we are trying to find here is the right balance”
Maria Albuquerque, commissioner for Financial Services and the Savings and Investments Union
The proposals include the removal of requirements for companies to get reasonable assurance on their CSRD reports, and ditching plans to develop sector-specific standards.
It will also review the technical criteria for CSRD, which is outlined in secondary legislation.
CS3D
On the EU’s incoming due diligence rules, the Commission wants to remove an existing commitment to consider adding the finance sector into the law in the future.
It has also proposed that companies can limit their risk assessments to their direct suppliers in most instances, and monitor them less often than the law currently requires.
They would not have to cut ties with those who refuse to align with the rules, and there would be no civil liability regime or 5% fines for companies that breached CS3D.
Transition plans would also be removed from the requirements.
Stop the clock
In the meantime, CS3D and CSRD will be paused, via a separate legislative proposal, so that the changes can be finalised.
European Parliament and Council will now have to decide their positions on both legislative proposals, before entering into inter-body negotiations.
Taxonomy
The EU’s Green Taxonomy has been spared any direct amendments in the omnibus, despite major pressure to make the framework voluntary.
However, its coverage will be greatly reduced if the CSRD is cut, because CSRD defines the companies obliged to report against the taxonomy.
Instead, the Commission has launched a consultation on how to revise the taxonomy at level two, based on recent recommendations made by its Platform on Sustainable Finance.
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