Brussels plans sweeping cuts to EU’s green rules, leaked bill reveals

BRUSSELS — The European Commission will propose deep cuts to the European Union’s environmental reporting rule book in its bid to slash red tape and boost the bloc’s struggling economy, according to a section of a draft of the upcoming omnibus legislation obtained by POLITICO.

In one of the first major pieces of legislation from the new Commission, a large cohort of businesses could be exempt from complying with corporate sustainability reporting rules, bringing only the largest companies under the regulations, the leaked document shows.

Requirements to monitor environmental and human rights abuses deep in companies’ global supply chains, meanwhile, could be considerably reduced under the proposed changes.

The eagerly anticipated proposal will be a relief to many businesses worried about having to meet complicated green reporting standards, many of which they complain are overlapping and require major investment to ensure compliance.

But green and center-left groups are likely to oppose many of the changes, setting up a fight in the European Parliament and among member countries.

“If confirmed, this is reckless,” Maria van der Heide, head of EU policy at NGO ShareAction, said on Saturday. “Sustainability laws designed to tackle the most pressing crises — climate breakdown, human rights abuses, corporate exploitation — are being crossed out behind closed doors and at record speed. This is not simplification, it’s pure deregulation.”

The details

Expected on Feb. 26, the omnibus bill aims to simplify three of the bloc’s major green rules affecting businesses: the corporate sustainability reporting directive (CSRD), which forces companies to report on their impact on the environment and their exposure to climate risk; the corporate sustainability due diligence directive (CSDDD), which requires them to investigate and address human rights and environmental abuses in their global supply chain abuses; and the EU taxonomy, which defines what counts as a sustainable investment.

The bill is also expected to include changes to the carbon border tax, though this was not confirmed in the leaked section of the bill.

According to the leaked draft, the Commission suggests making eight changes to the due diligence rules to significantly water them down, including asking businesses only to look at their direct suppliers and not further along their supply chains.

Changes to the CSRD, meanwhile, would see the law’s implementation delayed by a year, and would mean only the very largest companies — those with more than 1,000 employees and €450 million in turnover — would have to comply. Under the existing legislation, the rules would have applied to listed companies with as few as 50 employees and annual turnover of €8 million from 2026.

If passed, the latter change would mean that the scope of the CSRD and CSDDD would become the same, something which businesses and member countries have been asking for.

POLITICO reported on Friday that an earlier draft of the omnibus had included scrapping the so-called “double materiality” rule in the CSRD, which requires companies to report on their impact on the environment, not just the risks climate change poses to their financial health, as in more traditional sustainability reporting standards. The leaked section of the draft bill makes no mention of double materiality, however.

Once out, the proposed amendments will require approval from member countries in the Council of the EU and from lawmakers in the European Parliament.

Due diligence slashed

The original due diligence law — passed in 2024 and only due to be implemented incrementally from 2027 onwards — requires companies to look deep into their supply chains to identify and act on activities that harm the environment and violate human rights.

Under the new proposed rules, those duties would be radically reduced.

Companies would no longer have to look beyond suppliers with which they have a direct business relationship. The frequency at which they are expected to monitor suppliers would be reduce to once every five years, down from annually.

This would “significantly reduce burdens not just for in-scope companies but also for their business partners, often SMEs, which risk being at the receiving end of (detailed) information requests as part of these monitoring exercises,” the text states.

In addition, companies would no longer be forced to terminate that relationship with suppliers that fail to improve their behavior.

The Commission also wants to scrap the current EU-wide liability regime, in order to “reduce litigation risk” for businesses. That would mean that holding companies liable for breaches under the CSDDD would only exist under national laws.

The proposed changes also limit the scope of the term “stakeholder,” reducing the number of people and communities businesses must consider when conducting their due diligence.

The draft also softens the original requirement for companies to put into force a climate change transition plan.

The text also amends rules on how member countries should fine non-compliant companies, removing a requirement from the existing rule that the fine be linked to a company’s turnover.