The European Union is expected to ease its contentious Corporate Sustainability Reporting Directive (CSRD), with France poised to propose significant changes to the regulatory framework. According to sources familiar with the matter, the French government is preparing to unveil recommendations aimed at reducing the directive’s scope, potentially as early as this week.
France’s push for reform comes shortly after Germany called on the European Commission to scale back the directive, which requires extensive ESG disclosures from companies operating within the EU. Critics argue that the requirements place an undue burden on businesses, particularly as Europe faces economic challenges. Fresh data indicate that Germany’s economy contracted for a second consecutive year in 2024, with some attributing the decline to regulatory pressures undermining competitiveness.
Robert Ophele, Chair of the French Accounting Standards Authority said, “There is a shared recognition of the need to reduce the burden on businesses to better align with current challenges. Differences remain in the extent and timing of what should be done.”
The French proposal may align with Ophele’s recommendations to maintain most current compliance deadlines but reduce obligations for smaller companies with fewer than 1,000 employees.
The potential retreat from ambitious ESG reporting requirements in Europe coincides with political shifts in the United States, where President Donald Trump has pledged to reverse Biden-era climate policies, prioritise fossil fuel production and impose tariffs on allied nations.
The European Commission, which is assessing the CSRD’s scope, is expected to continue deliberations until 26 February, when it will discuss a broader legislative package known as the omnibus proposal. The Commission has yet to confirm details, with a spokesperson declining to comment on the ongoing talks.
Currently, CSRD impacts around 50,000 companies operating in the EU. Businesses with at least 250 employees and annual revenues of €50 million are required to disclose detailed ESG data, including board gender diversity and biodiversity risks. The first round of public disclosures is due in 2024 annual reports.
The directive, initially welcomed when adopted in 2022, is now facing resistance as companies grapple with looming compliance deadlines. Some policymakers have called for alignment with the Corporate Sustainability Due Diligence Directive (CSDDD), which limits requirements to firms with at least 1,000 employees and annual revenue of €450 million. This adjustment could reduce the number of companies affected by CSRD to approximately 7,000.
Criticism of CSRD extends beyond Europe. US lawmakers have described its scope as overreaching, while former European Central Bank President Mario Draghi highlighted excessive regulations as a factor contributing to Europe’s lagging competitiveness compared to the US. In response, European Commission President Ursula von der Leyen has committed to reducing administrative reporting burdens by 35%.
The discussions may delay the development of ESG reporting requirements for non-EU companies, initially planned for firms reporting in 2029. Debate continues over whether such rules should apply globally or remain limited to businesses operating within the bloc. With negotiations ongoing, the European Commission faces mounting pressure to balance its sustainability goals with the need to support economic growth and competitiveness.
