The European Union's Corporate Sustainability Reporting Directive (CSRD) is at the center of a growing debate over its future. Initially adopted in 2022 as part of the European Green Deal, the CSRD aims to enhance corporate transparency on sustainability by requiring companies to report detailed environmental, social, and governance (ESG) data. However, recent political and economic pressures have led the European Commission to consider revising or simplifying these requirements, sparking significant controversy.
In this article, we’ll cover the following elements:
- Simplification vs. fear of weakening sustainability standards
- Companies' resistance to reopening legislation
- Other sustainability directives impacting businesses
- The broader implications for the EU’s Green agenda
- What’s ngage take on the topic?
Push for simplification vs. fear of weakening sustainability standards
The European Commission is currently exploring an "omnibus" legislative package designed to simplify existing sustainability regulations, including the CSRD. The justification for this move is that companies, particularly SMEs, face excessive administrative and financial burdens that could hinder their competitiveness. Some Member States and industries argue that reporting obligations must be made more manageable to encourage business growth in a challenging economic environment.
However, many experts and sustainability advocates warn that opposing competitiveness and sustainability is a false dilemma. The CSRD was designed to guide businesses toward long-term resilience and sustainable growth and weakening it could be counterproductive. Critics argue that weakening these regulations may lead to insufficient non-financial risk management and reduced transparency, which are vital for sustainable business practices.
There are also concerns that any backtracking could harm the EU's global leadership in sustainable finance and corporate accountability, as the directive's principles—such as double materiality (assessing both financial and environmental/social impacts)—are gaining traction internationally. For example, China recently decided to implement sustainability reporting standards similar to those in force in Europe, which marks a significant turning point for the country, known as one of the world’s biggest polluters.
Companies' resistance to reopening legislation
The decision has not been taken yet, but it seems that the Commission is considering aligning CSRD and CSDDD application scope, meaning that companies with less than 1.000 employees will no longer fall under the CSRD regulation threshold. This would have a huge impact on the companies that already put time and resources into this compliancy process.
Even the bigger companies are not in favor of this review, interestingly, some of the strongest opposition to revising the CSRD and related directives comes from large multinational corporations. Companies like Nestlé, Unilever, and Marshave publicly urged the European Commission not to reopen sustainability laws such as the CSRD and the Corporate Sustainability Due Diligence Directive (CSDDD). They argue that policy certainty and legal predictability are crucial for businesses to make long-term investment decisions. Constantly changing the regulatory framework could create confusion and instability, ultimately harming the companies that did the right thing by putting time and resources into the process to respect legal deadline.
Other sustainability directives impacting businesses
The CSRD is just one part of a broader set of EU sustainability policies. Other key directives that are shaping corporate strategies and targeted by the omnibus include:
- Corporate Sustainability Due Diligence Directive (CSDDD): Requires large companies to assess and mitigate human rights and environmental risks in their supply chains. Recently adopted, its final version was scaled back after intense negotiations.
- EU Taxonomy for Sustainable Activities: In force since 2021 for public-interest entities, it defines which economic activities can be labeled as "sustainable" to prevent greenwashing and guide sustainable investments towards the goals of the Paris Agreement. Initially based on scientific criteria, its development had already involved numerous political negotiations, especially on contentious sectors like nuclear and gas.
- Green Claims Directive: Aims to regulate corporate sustainability claims to ensure transparency and accuracy in environmental declarations and is expected to be adopted in 2025.
The broader implications for the EU’s Green agenda
The current debate around the CSRD is emblematic of a larger struggle within the EU: how to balance ambitious climate and sustainability goals with economic and business realities. On one hand, simplification could ease compliance for companies, particularly smaller ones. On the other hand, watering down sustainability requirements could undermine the EU’s credibility and leadership in ESG regulation, sending mixed signals to investors and global markets.
With businesses, policymakers, and sustainability advocates locked in this debate, the coming months will be crucial in determining whether the EU stays committed to its Green Deal ambitions or shifts toward a more business-friendly—but potentially weaker—sustainability framework.
What’s ngage take on the topic?
Based on our experience acquired through projects with our clients, we indeed observed that CSRD can be quite complex to implement for companies. Therefore, we understand the request from certain companies & states for simplification in some areas, especially considering the similar datapoints requested.
On the one hand, CSRD needs clarity, not complexity. While CSRD brings structure and transparency, its implementation leads to significant grey areas and leaves some room for interpretation, particularly through the audit processes which can vary, ultimately adding an additional burden. Moreover, providing companies with a set of positive & negative IRO’s (Impacts, Risks & Opportunities) by industry or business type would helpto initiate the Double Materiality Assessment (DMA) process. Interpretation will always be part of the process, but that doesn’t mean companies should have to start from scratch.
On the other hand, we believe some things shouldn’t change: the company threshold must remain the same as many businesses have already started or adapted their reporting, and we’re finally seeing boardrooms engage in sustainability thanks to the regulatory constraint. Raising the threshold again would disrupt this mindset changes and efforts already carried out. Lastly, XBRL tagging must remain in place regarding the large amount of information reported and the need to ensure that the data is easily accessible to users of the sustainability report. Not enforcing this feature in the Directive would threaten the CSRD to become as vague as previous voluntary sustainability reporting, defeating its purpose of transparency, credibility & trust.