EU countries on Tuesday gave their final approval to scale back rules that require companies to address environmental and human rights risks in their supply chains, after months of pressure from businesses and governments including the U.S and Qatar.
The changes, approved by European Union ministers at a meeting in Brussels, weaken the rules for most businesses currently covered. EU governments and the European Parliament negotiated the amendments last year.
They follow criticism from some industries that EU red tape and strict regulation hindered competitiveness with foreign rivals. But the weaker laws have dismayed environmental campaigners and some investors who said it would become harder to identify genuinely sustainable companies.
Under the changes, the EU will limit its corporate sustainability due diligence directive (CSDDD) to only the largest EU corporations – those with more than 5,000 employees and 1.5 billion euro ($1.8 billion) annual turnover.
The same rules will cover foreign companies whose EU turnover exceeds that amount. They could face fines of up to 3% of net global turnover for breaching the rules.
“We are reducing unnecessary and disproportionate burdens on our businesses, with simpler, more targeted and more proportionate rules,” said Marilena Raouna, Cyprus’s deputy EU affairs minister, who chaired Tuesday’s meeting.
The U.S. and Qatar had demanded the EU scale back CSDDD, warning that it risked disrupting their gas supplies to Europe. U.S. oil and gas major ExxonMobil has criticized the changes as not going far enough.
The EU also delayed the deadline to comply with CSDDD to mid-2029 – versus mid-2027 previously for larger companies – and dropped a requirement for companies to adopt climate change transition plans.
The changes also cover the EU’s corporate sustainability reporting directive, which requires companies to disclose their environmental and social impact to make this more transparent to investors and consumers.
The EU agreed that such reporting will cover only companies with more than 1,000 employees and 450 million euro annual net turnover – plus non-EU firms with this turnover inside the bloc – versus companies with more than 250 employees now.
The changes will pass into law in the coming weeks.
($1 = 0.8488 euros)
(Reporting by Kate Abnett; editing by Mark Potter)
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