Companies subject to the EU’s Corporate Sustainability Due-Diligence Directive should see an “indefinite postponement” of its implementation, a French government policy document says. Citing competitiveness risks, France proposes narrowing the scope, easing reporting burdens, and creating a central supervisory authority, while suggesting a two-year delay for the related Corporate Sustainability Reporting Directive.
EU companies falling under the scope of the EU’s Corporate Sustainability Due-Diligence Directive should see an “indefinite postponement” of the application of the rules, a French government policy document says.The letter, seen by MLex, includes several proposals to simplify the bloc’s reporting regulations and boost its competitiveness (see here).
The EU’s sustainability reporting directive, dubbed CS3D, was published on July 5, 2024, and entered into force the customary 20 days later. It will start applying to the largest companies in 2027. Any decision to postpone the application of the rules would have to come from the EU's executive branch, the commission and would also need to be approved by other member countries and EU lawmakers.
The law will affect companies with more than 1,000 employees and a net worldwide turnover exceeding 450 million euros ($471 million). This means almost 6,000 companies based in the EU and 900 based outside.
Additionally, the directive will take effect in phases based on company size: in 2027 for those with more than 5,000 employees and 1.5 billion euros in turnover; in 2028 for companies with more than 3,000 employees and 900 million euros in turnover; and in 2029 for those with more than 1,000 employees and 450 million euros in turnover.
“The new CS3D obligations do, however, entail a number of potential risks identified by companies and likely to affect their competitiveness,” the French position paper reads, “including in relation to non-European companies not subject to these same standards.”
“As such, in the new context of a diagnosis of loss of competitiveness vis-à-vis our main international competitors, … the French authorities are in favor of an indefinite postponement of the entry into force of the Directive.”
The French proposal lays out a path forward, suggesting that an indefinite postponement would create space for critical modifications to the directive.
Among the proposed tweaks, the paper includes a curb on the law’s scope, only targeting “European companies with over 5,000 employees and sales of over 1.5 billion euros worldwide, and non-European companies with sales of over 1.5 billion euros on the European market.”
The document calls for establishing “a single European supervisory authority” to oversee due-diligence reporting and suggests excluding the financial sector’s downstream operations during a future review of the law.
Currently, only the upstream operations of financial companies fall under the EU’s due-diligence obligations (see here).
The French paper also targets another EU’s landmark sustainability law, the Corporate Sustainability Reporting Directive, which imposes disclosure obligations for listed companies.
“The proportionality of the framework is no longer ensured in light of the very substantial competitiveness challenges that European companies are currently facing,” it reads.
To address these concerns, France proposes “significantly lightening reporting burdens by drastically reducing the number of indicators and focusing them on climate objectives.”
The document also raises the possibility of a two-year postponement for the directive’s implementation, emphasizing the need for coordination with existing provisions in member states that have already transposed the directive.
“If such a postponement were to be decided, it would have to be properly coordinated with the provisions already applicable,” the paper adds.
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