Brussels: European Union members and parliament on Tuesday reached a provisional agreement to simplify sustainability reporting and due diligence requirements to boost EU competitiveness. The agreement simplifies directives on corporate sustainability reporting (CSRD) and corporate sustainability due diligence (CS3D) by reducing the reporting burden and limiting the trickle-down effect of obligations on smaller companies.

According to Emirates News Agency, the informal agreement mandates social and environmental reporting only for EU companies with over 1,000 employees and a net annual turnover exceeding £450 million. For non-EU companies, the net turnover threshold has been set at £450 million generated within the EU for sustainability reporting.

The co-legislators have also agreed to further simplify reporting requirements, making them more quantitative, while sector-specific reporting remains voluntary. The updated rules protect smaller companies with fewer than 1,000 employees from the responsibility of reporting beyond voluntary standards, allowing them to refuse additional reporting demands.

MEPs have ensured that the Commission will develop a digital portal providing businesses with access to templates and guidelines on EU and national reporting requirements.

Under the agreement, only large EU corporations with more than 5,000 employees and a net annual turnover exceeding £1.5 billion will need to conduct due diligence to minimize their negative impact on people and the planet. These rules will similarly apply to non-EU corporations with an EU turnover above the same threshold.

Companies are encouraged to adopt a risk-based approach in their activities and avoid requesting unnecessary information from companies not covered by the scope.

Businesses subject to the revised due diligence rules will no longer be required to prepare a transition plan aligned with the Paris Agreement. However, they will remain liable at the national level for non-compliance and could face fines up to 3 percent of their net worldwide turnover, with guidance to be provided by the Commission and member states.