This week’s EU Omnibus developments
The European Commission adopted delegated acts to simplify the Taxonomy Regulation on Friday.
As per its proposal back in February, it has cut 65% of data points for non-financial companies (and 90% for financials) and streamlined the controversial do-no-significant-harm criteria for pollution prevention.
It has also removed the requirement for companies to disclose their taxonomy alignment for activities that account for less than 10% of revenue or spending.
Operational expenditure can be omitted completely if it’s immaterial to the business model under the changes.
They will come into force for disclosures covering the 2025 financial year, with an option to defer by another year if companies “find this more convenient”.
The proposal is now open for scrutiny by European Council and Parliament for between four and six months.
Dutch CSRD review
The Dutch regulator AFM published a review of Wave One materiality assessments this week, in which it gave “compliments [to] the first group of reporting companies” for providing “useful and relevant information”.
It concluded that there had been significant progress since last year’s voluntary CSRD reports, namechecking firms such as Heineken, JDE Peet, ING Group, Ahold Delhaize and BAM Group.
“We observe that companies report their sustainability information in a more structured and accessible manner, but also in a more visual way,” stated AFM.
But it flagged a lack of clarity from some firms about whether they’ve considered all relevant parts of their value chains, and how they decide whether topics are material or not.
“Threshold values are often applied without much explanation to the reader,” the report noted.
“Although the use of threshold values is useful to limit the number of material sustainability topics, it is important that the user of the sustainability report has a sufficient understanding of how the materiality of a subject has been determined and what the most important considerations have been.”
AFM also observed that, beyond climate change, environmental topics are “often” identified as non-material.
“There might be logical underlying reasons for this observation, but we notice that companies often neglect to report or report very little as to why certain topics are immaterial to them.”
In addition, some companies emphasise the positive environmental and social impact of their products, “but pay little attention to disclosing the negative impacts and risks transparently”.
Meanwhile, as reported earlier this week, the Commission has granted its advisory group EFRAG an extension on revisions to the European Sustainability Reporting Standards.
EU watchdog issues omnibus warning
The EU ombudsman has warned Commission president Ursula von der Leyen against rushing the omnibus through without following due process.
Teresa Anjinho told the Financial Times the EU’s simplification agenda wasn’t the problem. Instead, she said, it was the decision by von der Leyen – who faces a no-confidence vote next week over her handling of communications with Pfizer’s CEO during the pandemic – to “attach to the simplification urgency procedures that deviate from the normal legislative procedures”.
Across the pond, Exxon’s CEO told news station CNBC that the Corporate Sustainability Due Diligence Directive was “one of the worst pieces of legislation ever passed anywhere”.