EU countries approve a weakening of company sustainability laws

After months of pressure, the EU has finally approved a reduction in rules that require companies to consider environmental and human rights risks within their supply chains. This comes after businesses and governments such as Qatar and the U.S. have pushed for this.

The changes approved by the European Union Ministers in a meeting held in Brussels weaken the current rules that apply to most businesses. The EU governments and European Parliament negotiated these amendments in the past year.

The move follows criticisms from certain industries that EU regulations and red tape hindered their ability to compete with foreign competitors. The weaker laws, however, have disappointed environmentalists and investors who say it will be harder to identify "truly sustainable companies".

The EU's corporate sustainability due diligence Directive (CSDDD), which was previously only available to large EU companies, will now be limited to those with over 5,000 employees or a 1.5 billion euro ($1.8billion) annual turnover.

The same rules will apply to foreign companies that exceed this amount in EU turnover. The fines could be up to 3% on their net global turnover.

Marilena RAOUNA, Cyprus' deputy EU Affairs Minister, who presided over the meeting on Tuesday, said: "We're reducing unnecessary and excessive burdens for our businesses with simpler, targeted, and more proportionate regulations."

Qatar and the U.S. had demanded that EU reduce CSDDD. They warned it could disrupt their gas supply to Europe. ExxonMobil, the U.S. gas and oil major, has criticised that these?changes are not enough.

The EU has also pushed back the deadline for compliance with CSDDD to mid-2029, instead of mid-2027 for larger companies. It has also dropped a requirement that companies adopt climate change plans.

The changes cover also?the EU corporate sustainability reporting directive which requires companies?to disclose?their environmental?and social impact?to make it more transparent for investors and consumers.

The EU has agreed to report only on companies with over 1,000 employees and 450 million euros in annual net turnover, plus non-EU companies that have this turnover within the EU. Currently reporting is done by companies with 250 or more employees.

In the next few weeks, these changes will become law.

(source: Reuters)