European pushback on Sustainability Reporting
In a surprising turn of events, two of Europe’s most influential economies, France and Germany, are spearheading efforts to delay and significantly revise the European Union’s ambitious sustainability reporting frameworks. These moves, coming in the wake of mounting political and economic pressures, could redefine the trajectory of corporate environmental, social, and governance (ESG) reporting across the continent.
At the heart of this debate lie two cornerstone EU legislations: the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). Designed to bring transparency and accountability to corporate operations, these directives aim to enforce stringent sustainability disclosures and due diligence obligations.
The CSRD, which significantly expands the scope of its predecessor, the Non-Financial Reporting Directive (NFRD), requires over 50,000 companies to report detailed ESG data, up from 12,000 under the NFRD. Its phased implementation began in 2024, targeting large public-interest entities first, with SMEs and non-EU companies slated to follow.
The CSDDD, adopted in 2024 after extensive revisions, mandates businesses to identify and address adverse impacts on human rights and the environment throughout their supply chains. Initially proposed with a broad scope, its final version already reflects significant concessions, applying primarily to larger corporations.
Germany: Streamlining and Delaying
Germany has called for a two-year delay in CSRD reporting obligations for smaller companies scheduled to comply in 2026. Finance Minister Jörg Kukies has argued that the delay would provide breathing room to reassess and streamline reporting requirements, reducing the bureaucratic burden on SMEs.
The German proposal also advocates eliminating sector-specific CSRD reporting obligations, which were initially intended to take effect in 2026. According to Kukies, this approach would pave the way for a more “effective and efficient” sustainability reporting system, harmonized across sectors.
Additionally, Germany suggests raising the company size threshold for CSRD compliance. With 13,000 German firms potentially subject to these regulations, the push aims to exclude smaller businesses, citing concerns over the administrative strain of meeting extensive data requirements.
France: Regulatory Pause and Simplification
Echoing Germany’s concerns, France has proposed even more drastic measures. In a submission to the European Commission, the French government called for a “massive regulatory pause” on both the CSRD and CSDDD. Citing fears of lost GDP potential and competitive disadvantages in the global market, France advocates a fundamental reevaluation of the directives.
The French submission calls for an indefinite postponement of the CSDDD and a significant narrowing of its scope. By proposing to limit the directive to companies with over 5,000 employees and €1.5 billion in revenue, France’s approach would exempt approximately 80% of businesses from compliance.
- France also seeks substantial revisions to the CSRD, including:
- Delaying implementation for smaller businesses.
- Reducing the number of required indicators, with a focus on climate objectives.
- Aligning reporting obligations for medium-sized companies with the less stringent requirements for listed SMEs.
- Clarifying transition plan requirements, suggesting these need not align with the Paris Agreement but instead serve as comparative benchmarks.
Business Reactions: Divided Views
While some businesses welcome these proposals as a necessary reprieve from onerous obligations, others warn of the risks associated with reopening settled legislation. Industry leaders caution that such moves could create policy uncertainty, undermining investments already made in compliance and jeopardizing the EU’s sustainability goals.
Broader Implications
These coordinated efforts by France and Germany signal a broader reassessment of Europe’s sustainability agenda. Both countries emphasize the need for streamlined regulations that balance environmental ambitions with economic realities. Proposals to harmonize reporting standards internationally further underscore the drive for simplicity and global alignment.
However, critics argue that these delays and revisions risk diluting the EU’s leadership in sustainability and may erode public trust in the bloc’s commitment to combating climate change and promoting corporate accountability.
The Road Ahead
As the European Commission considers these proposals, the stakes are high. The outcome will determine not only the future of corporate sustainability in Europe but also the region’s global standing as a leader in ESG policy. For now, businesses and policymakers alike are left navigating a landscape fraught with uncertainty, where the balance between ambition and pragmatism remains elusive.
