EU to re-open and merge CSRD, CS3D and Taxonomy
The EU plans to merge the Corporate Sustainability Due Diligence Directive (CS3D), the Corporate Sustainability Reporting Directive (CSRD) and the Taxonomy, opening the door for all three to be revised.
Speaking at a press conference on a different topic earlier this month, Ursula von der Leyen said the European Commission would propose an omnibus legislation in a bid to “reduce bureaucracy [and] reduce reporting burdens”.
An omnibus is a rarely-used instrument that consolidates a series of EU laws into a single legislation.
“You have a huge approach to reduce, in one step, across all the different fields [where it] is agreed it is too much,” the Commission President told journalists on November 8th.
“We will look, for example, at the triangle [of the] Taxonomy, CSRD, CS3D.”
She stressed that “the content of the laws is good” and wouldn’t be changed.
“We want to maintain it, and we will maintain it. But the way we get there, the questions we are asking, the data points we are collecting – thousands of them – is too much. Often redundant, often overlapping.”
“So it’s our task to reduce this bureaucratic burden without changing the correct content of the law.”
But if the omnibus follows the usual legislative path, it will not be up to the Commission whether the three laws remain untouched.
“The Commission will table a legislative proposal, and then it’s a free-for-all for the Parliament and the Council,” explains Nicolas Lockhart, a co-head of ESG at law firm Sidley Austin.
“Both can propose amendments to the Commission’s proposal, and we saw last week that there’s a centre-right coalition in Parliament capable of driving changes to these rules that go quite far beyond what the Commission proposes.”
Last week’s chaotic vote in Parliament saw MEPs push through much more aggressive cuts to the scope and timeline of the EU Deforestation Regulation than the proposals the Commission had originally asked them to approve.
Lockhart noted it was “likely that there will be considerable pressure within the Parliament, and possibly the Council, to weaken the reporting standards” if an omnibus is introduced.
Another senior lawyer, based within a large Swiss company, told Real Economy Progress: “If this actually happens, everything is fair game.”
Speaking on the condition of anonymity, he said: “It is very bad from a sustainability perspective, because creating a new law means re-opening the existing ones and essentially replacing them. That’s where the danger lies.”
“Von der Leyen can say the Commission won’t change anything, but it’s Parliament and Council that decide in reality.”
It is unclear how an omnibus legislation will work, given that CSRD, CS3D and the Taxonomy Regulation don’t fit neatly together: they are a combination of regulations and directives, with applicability to different sets of companies, and they sit under different Commission mandates.
In principle, the European Sustainability Reporting Standards will remain untouched because they belong to the Commission alone.
“What all this means is not clear at the moment,” said Lockhart. “We will have to see how it unfolds through the legislative process.”
At the time of publication, the European Commission had not responded to a request for more information about its plans.