New EU Proposals: Commission Eases Sustainability Rules

1. Sustainability Reporting (CSRD, EU Taxonomy)

Corporate sustainability reporting – CSRD

a. Excludes 80% of companies from the scope of CSRD, focusing on large firms that have a larger impact on the environment and people and ensuring smaller supply chains are not burdened.
b. Extension by two years until 2028 for organizations that were already in scope and required to report by 2026 / 2027

EU Taxonomy

a. Limit EU Taxonomy reporting to the largest companies, aligning with the CSDDD scope, while allowing other large companies under the CSRD to report voluntarily.
b. Reduce costs for smaller companies while enabling those seeking sustainable finance to continue reporting.
c. Reporting on activities that are partially aligned with the EU Taxonomy to support a gradual transition to sustainability and scale up transition finance.
d. Financial threshold for EU Taxonomy reporting.
e. Simplifications to the Do no Significant Harm (DNSH) criteria – to classify if an economic activity substantially contributes to one or more of the environmental objectives or if it causes more harm to the environment than the benefits it brings.
f. The adjustment to the key performance indicator known as the Green Asset Ratio (GAR) could result in a higher GAR for banks. The GAR measures the bank's sustainable investments. Banks are now allowed to exclude companies with fewer than 1,000 employees or an annual turnover of less than €50 million from the GAR's denominator, as these companies are not subject to the Corporate Sustainability Reporting Directive (CSRD).

2. Simplifying Sustainability Due Diligence

a. Simplification and harmonization of due diligence requirements
b. Reduce the burdens on SMEs by limiting information requests. Change sustainability assessments from annual to once every five years, with ad-hoc assessments on their supply chain only when necessary, focusing on direct business partners.
c. Extend the deadline for sustainability due diligence requirements for major companies to July 2028, while advancing the adoption of guidelines to July 2026.
d. Remove EU civil liability rules and ensure that victims and companies are protected from excessive compensation payments under each country's liability laws

3. Fairer Trade: Simplifying the Carbon Border Adjustment Mechanism (CBAM)

a. Simplify the authorization of CBAM declarants
b. Businesses importing fewer than 50 tonnes of CBAM goods annually into the EU will be exempted from CBAM obligations
c. Calcined kaolinic clays used in cement production may be removed from the CBAM scope.
d. The carbon emissions of certain aluminum and steel products under the CBAM mostly come from their raw materials, not the production process. Emissions from finishing processes are usually low and are exempted from overall embodied emission calculation.
e. Non-EU manufacturers of complex CBAM goods won't have to account for the emissions of precursor materials if they have already been subject to carbon pricing under the EU ETS or a fully integrated equivalent system
f. The required ratio of CBAM certificates to be purchased in the definitive phase may be reduced to 50% coverage for emissions from imported goods, down from the previous 80%.
g. Extensions have been provided for the annual submission of CBAM declaration and purchase of CBAM certificates.

4. EU Investment Program

a. Enhances programs like Invest EU, unlocking €50 billion in funding through past returns and legacy funds.
b. Facilitate Member States' participation in the program, support local businesses, and attract private investments.
c. Simplify administrative processes for partners, intermediaries, and SMEs, resulting in €350 million in cost savings.