Businesses and investors renew calls to ‘preserve the core’ of CSRD and CSDDD

As EU legislators go back to work on the Omnibus framework, a group of nearly 500 companies, investors, service providers and associations are calling again for the preservation of impactful sustainability reporting rules within CSRD and CSDDD.

Arguing that the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) are essential to achieve the EU’s wider sustainability goals, the group – which includes the likes of H&M, Allianz, Nordea, Decathlon and IKEA – makes a number of suggestions to simplify implementation while preserving the substance of the rules.

For instance, they recommend simplifying the European Sustainability Reporting Standards (ESRS) in a way that maintains the double materiality approach of the CSRD and ensures interoperability with voluntary standards like ISSB.

Maintain CSRD scope at 500 employees threshold

The new scope of CSRD and CSDDD is one of the most hotly debated elements of the Omnibus simplification process: the European Commission has proposed applying CSRD to companies with 1,000 employees or more (instead of the original 250-employee threshold) – a position accepted by the European Council. 

In their open letter, companies and investors are asking European legislators to include companies with more than 500 employees in the scope of CSRD. This, they argue, will ensure regulatory continuity, since it is in line with the scope of the Non-Financial Reporting Directive (NFRD) which was adopted a decade ago. “A phase-in period of 2-4 years could eventually be applied, starting with companies above 1,000 employees,” they add.

Safeguard ‘core elements’ of CSDDD

The Omnibus framework has been accused by many as effectively cancelling CSDDD by dramatically reducing its scope and removing an obligation to implement a climate transition plan. 

Now, businesses and investors are calling for regulators to “safeguard the core elements of the CSDDD” and ensure there can still be a “constructive exchange of sustainability information between investors and companies”.

They want the law to maintain risk-based corporate due diligence, in line with the UN Guiding Principles for Business and Human Rights, and OECD Guidelines, as well as the requirement for companies to adopt climate transition plans that include science-based targets with disclosures in line with CSRD. 

Repeated calls to protect core of EU’s sustainable finance framework

This letter is the latest of many warnings by the business and finance community that watering down CSRD and CSDDD too much would jeopardise Europe’s sustainable future. In August, European Central Bank President Christine Lagarde wrote that the rules are needed to protect the EU’s financial system against growing climate risks.

Earlier this year, a survey conducted by NGO WeAreEurope found that nearly two-thirds (61%) of European firms are satisfied with the Corporate Sustainability Reporting Directive (CSRD) in its current form, while half are unhappy with the Omnibus ‘simplification’ package proposed by the European Commission.

The European Commission is also under scrutiny for the way it has conducted the Omnibus legislative process – rushing through approvals and skipping essential consultations. In July, the European Ombudswoman, who is responsible for holding EU institutions accountable, wrote to EU Commission President Ursula von der Leyen to ask her to explain procedural violations under the Better Regulation guidelines for the Omnibus sustainability simplification package.