The European Commission’s decision to delay tough new sustainability and due diligence laws offers “a welcoming reprieve” for British businesses, industry experts have said.
The EC has confirmed it is postponing the rollout of its corporate sustainability reporting directive (CSRD) and corporate sustainability due diligence directive (CSDDD) to 2028.
This followed pressure from businesses and lawmakers across Europe – including UK businesses operating in the EU – over the red tape burden that came with complying with the legislation amid rising costs, as well as their ability to meet the original 2026/2027 timeline.
Kiren Pandya, principal at supply chain consultancy Inverto, said: “These delays offer a welcome reprieve for businesses who are struggling to rearrange their supply chains in accordance with these new mandates. Unfortunately, businesses can’t be complacent – this legislation is being delayed, not cancelled.
“Complying to these new rules is still going to be a significant challenge for businesses – even with the new deadline.”
Together, the CSRD and the CSDDD aim to strengthen corporate responsibility in Europe – while the CSRD focuses on expanding sustainability reporting, the CSDDD encourages companies to engage in responsible behaviour across their supply chains, including in labour and human rights matters.
The CRSD and CSDDD will require businesses, including British businesses operating in the EU, to report extensively on the impacts of their activities. This includes:
- Reporting on environmental factors, such as impacts of purchases on climate change and marine systems
- Human rights factors, such as employment rights
- Governance factors, such as business ethics and corporate culture
Under the CRSD, companies were set to report on their carbon emissions in 2026 and 2027 in a standardised way that pushed for greater transparency and comparability.
The scope of the requirements has now also been stripped back – only larger companies with over 1,000 employees and over €50m in turnover will now need to report on their carbon emissions, when previously that would apply to companies with as few as 50 employees and €8m turnover.
This means that around 80% of companies would be removed from the scope of CSRD, and sector-specific reporting standards would also be deleted.
Meanwhile, UK companies with turnover generated in the EU of more than €450m are also required to comply with CSDDD. And even when a British company does not meet the thresholds, it may still be indirectly affected if it is part of the supply chain for companies that do – leading to increased scrutiny and due diligence requirements from their EU-based partners.
But the proposed changes will also now delay the impacts of CSDDD rules on companies to fix potential human rights and environmental issues in their supply chains from 2027 to 2028.
Companies will now only be required to assess their supply chains for compliance with CSDDD every five years – this is compared to once a year before the proposal was published.
Additionally, due diligence now applies only to direct suppliers, versus when it previously covered indirect suppliers as well. Companies would no longer be required to terminate relationships with non-compliant suppliers under the new plans.
The amendments to the corporate responsibility laws came as part of the EC’s much-anticipated ‘Omnibus Package’, a series of proposals unveiled last week to drastically reduce red tape by achieving at least 25% reduction in administrative burdens and at least 35% for SMEs until the end of the EC’s mandate.
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However, many campaigners have deemed this an attack on the EU’s Green Deal – much like the Commission’s recent decision to push back its flagship anti-deforestation regulations.
Eline Achterberg, Oxfam’s policy lead for business & human rights in agri-food value chains, said the Commission was “not simplifying but completely kneecapping the EU corporate sustainability due diligence directive”.
“If these proposals go ahead, we are left with a law that is a bureaucratic paper tiger stripped of all potential to promote human rights and combat climate change in business supply chains,” she said.
“But in case you still had any doubts: this is not about simplification or reducing bureaucracy. This is deregulation. This is the European Commission turning its back on the Green Deal and its commitments on sustainable value chains and corporate accountability.”
Achterberg added the delays were “not useful but frustrating and confusing for companies already investing in proper due diligence systems”.
International human rights organisation Walk Free has also warned the EU is risking a setback by weakening the laws.
“These new rules would water down environmental and human rights supply chain standards,” the group said.
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