European Parliament votes to lighten sustainability, due diligence regulations

The European Parliament voted Nov. 13 to reduce obligations under a contentious suite of social and environmental laws that have drawn ire from major oil and gas producers.

Members of the European Parliament voted 382 in favor and 249 against the legislative text on adjustments to the EU's Corporate Sustainability Reporting Directive, or CSRD, and its Corporate Sustainability Due Diligence Directive, or CSDDD. There were 13 abstentions.

The vote comes after MEPs rejected an earlier proposal in October that had been adopted by the Legal Affairs committee.

Among several changes approved in the revised proposal by MEPs was to remove language that would set the maximum penalty for falling foul of the CSDDD at 5% of a company's global turnover, MEP Jorgen Warborn, who is rapporteur for the file, said during a press conference following the vote. Instead, Member States will be able to decide the appropriate level of penalties, he said.

The final text adopted by the Parliament was not yet published.

The Parliament also voted to limit the scope of those companies that would have to report under both regulations.

CSRD reporting would be limited to those firms employing on average over 1,750 people and with a net annual turnover of over Eur450 million ($524 million). Reporting under the CSDDD would only apply to large companies with more than 5,000 employees and a net annual turnover of over Eur1.5 billion.

Reporting requirements under both regulations for such companies are also relaxed under the Parliament's proposal, including the removal of an obligation under the CSDDD that companies prepare a transition plan to align their business model with the Paris Climate Agreement.

The European Council adopted its position on the regulatory changes in June.

The Council and Parliament will now begin negotiations to agree on a final text. Warborn said the discussion would begin next week, with an aim of finalizing the legislation by the end of the year.

CSRD and CSDDD

Adopted in 2022, the CSRD adjusts corporate sustainability reporting requirements. The CSDDD, adopted in 2024, requires companies to identify and address certain negative human rights and environmental impacts in their operations and those associated with them.

In April, the EU voted to delay the application of parts of the CSRD and CSDDD in an effort to simplify its regulatory landscape. In tandem with the delay, legislators are also seeking changes to both laws.

Two of the EU's major LNG suppliers have recently published concerns over the CSDDD. The US and Qatar released a joint letter targeting the law for its "unintended consequences for LNG export competitiveness" and calling for changes to articles on transition plans for climate change mitigation, penalties applied for noncompliance, and civil liability of companies that fail to comply.