Yesterday, on 26th February, the European Commission proposed a series of changes aimed at simplifying regulations, increasing competitiveness and unlocking additional investment opportunities. These changes relate, primarily, to changes in the area of sustainability reporting (CSRD and EU taxonomy).
Among the proposed changes are presented:
- exclusion of about 80% of enterprises from CSRD reporting. These obligations are to be focused on the largest entities – reporting requirements will apply only to large companies with more than 1,000 employees (i.e., companies with more than 1,000 employees and a turnover of more than €50 million or a balance sheet total of more than €25 million);
- deferring for two years (until 2028) the reporting requirements for companies currently subject to the CSRD, which are required to report from 2026 or 2027;
- introducing a financial materiality threshold for taxonomy reporting and reducing the number of reporting templates by about 70%.
In addition, due diligence changes are also proposed such as:
- simplifying sustainability due diligence requirements so that covered companies avoid unnecessary complications and costs, e.g. by focusing systematic due diligence requirements on direct business partners; and by reducing the frequency of periodic assessments and monitoring of partners from annually to 5 years, with ad hoc assessments as needed;
- further increasing harmonization of due diligence requirements to ensure a level playing field across the EU;
- postponing the start of sustainability due diligence requirements for the largest companies by one year (until July 26, 2028), while accelerating the implementation of the guidelines by one year (until July 2026).
Also important are changes in, the so-called border carbon tax (CBAM). Among the most significant proposals should be presented:
- exemption of small importers from CBAM (mainly SMEs and individuals). In particular, we are talking about entities that small quantities of goods covered by CBAM, which is a very small amount of embedded emissions entering the Union from third countries. The above change is expected to work by introducing a new cumulative annual CBAM threshold of 50 tons per importer, thus eliminating the CBAM obligation for some 182,000 or 90% of importers, mainly SMEs, while covering more than 99% of emissions.
- simplifying the rules for companies that remain within the scope of CBAM: in terms of authorization of entities submitting CBAM declarations, as well as rules related to CBAM obligations, including calculation of embedded emissions and reporting requirements;
- enhancing the effectiveness of CBAM in the long term by tightening regulations to prevent circumvention and abuse;
- it is also planned to expand the scope of CBAM to other ETS sectors or processed goods (a new legislative proposal will be submitted in this regard).
In addition to the above, the European Commission has also proposed a number of changes aimed at unlocking investment opportunities.
Among the simplifications planned are:
- increasing the EU’s investment potential by leveraging returns from previous investments, as well as optimized use of funds still available under legacy instruments, making more funds available to companies;
- making it easier for member states to participate in the program, promote their own economic activity and mobilize private investment;
- simplify administrative requirements for implementing partners, financial intermediaries and final recipients, particularly SMEs.
The above legislative proposals are to be submitted to the European Parliament and the Council immediately. They are to be prioritized on the legislative track.
