Reduced social and environmental reporting
The Commission originally proposed cutting the number of companies required to carry out social and environmental reporting by 80%, whereas MEPs want to reduce the scope further to cover only those companies with over 1,000 employees on average and a net annual turnover above 450 million euro. This would also apply to sustainability reporting under taxonomy rules (i.e. a classification of sustainable investments).
For firms no longer covered by the rules, reporting would be voluntary, in line with Commission guidelines. To prevent large companies from shifting their reporting duties onto their smaller business partners, these would not be allowed to request information beyond the voluntary standards. Sector-specific reporting would also become voluntary and existing sustainability reporting standards would be further simplified with a focus on quantitative information and on reducing the administrative and financial burden. The Commission would also establish a digital portal for companies with free access to templates, guidelines and information on all EU reporting requirements complementing the European Single Access Point.
Due diligence only for big companies and no EU liability
According to MEPs, due diligence rules requiring companies to prevent and limit their adverse impact on human rights and the environment should only apply to large EU businesses with more than 5,000 employees and a net yearly turnover above 1.5 billion euro, and to foreign businesses with a net turnover in the EU above the same threshold.
Instead of systematically asking for information required for their due diligence assessments from their business partners, MEPs want these large companies to adopt a risk-based approach, whereby they only ask for the necessary information where there is the plausible prospect of an adverse impact in their business partners’ activities. In the case of firms outside the scope of the rules, this would be possible only as a last resort. Companies would still be required to prepare a transition plan aligning their strategy to a sustainable economy and the Paris Agreement.
Businesses should be liable for damages caused by breaches of due diligence obligations under national law, rather than at the EU level. The maximum fine level for offending companies would remain at 5% of their global turnover, and the Commission and EU member states should provide guidance for national authorities on these penalties.
Source: European Parliament
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