European Union members and parliament reached a deal today to cut corporate sustainability laws, after months of pressure from companies and governments, including the US and Qatar.
The changes, which would weaken such rules for a large majority of businesses now covered, come in response to criticism from some industries that EU red tape and strict regulation hindered competitiveness with foreign rivals.
"This is an important step towards our common goal to create a more favourable business environment to help our companies grow and innovate," Denmark's European affairs minister, Marie Bjerre, said in a statement.
The agreement was a very good compromise, added Jorgen Warborn, a Swedish centre-right lawmaker.
The push to weaken the laws had dismayed environmental campaigners, some investors and governments, including that of Spain, which had urged Brussels to keep the rules intact to support European priorities on sustainability and human rights.
The EU's corporate sustainability reporting directive (CSRD) requires companies to disclose details of their environmental and social impact, so as to be more transparent to investors and consumers.
EU negotiators agreed that such reporting will cover only companies with more than 1,000 employees and annual net turnover exceeding €450m, down from about 50,000 companies with more than 250 employees now.
For non-EU firms, the threshold was set at €450m in turnover generated within the bloc.
The deal limits the EU's corporate sustainability due diligence directive (CSDDD) to only the largest EU corporations, which have more than 5,000 employees and annual turnover exceeding €1.5 billion.
The same rules will cover non-EU companies with turnover in the EU above that level.
The European Union has also dropped a clause for companies to adopt climate transition plans under the directive.
The US and Qatar have pressured Brussels to scale back the due diligence law, warning that the rules risked disrupting liquefied natural gas trade with Europe.
EU co-legislators also agreed to cap penalties for non-compliance at 3% of companies' global turnover, with guidelines to follow from the Commission, and compliance required by July 2029.
Companies such as Exxon Mobil, as well as the leaders of Germany and France, had sought deeper cuts, including scrapping the due diligence law entirely, saying it hurt the competitiveness of European businesses.
The EU Parliament and EU countries must each give formal approval for the changes to become law, usually a formality that waves through pre-agreed deals.
