The EU is looking to further scale back sustainability legislation. As omnibus negotiations grind along, the EU Commission seeks to unilaterally cut a number of sustainability measures. The Commission is doing this through delaying or abandoning implementation of “Level 2” texts. Level 1 texts are those negotiated by the Council, Commission, and Parliament, often laying the groundwork for a regulatory scheme. Level 2 texts are the regulations that follow, especially for phased-in requirements. These are often promulgated by delegated regulations, which the Commission may pass at its discretion.
Responsible Investor reports on a number of Level 2 measures the Commission is deprioritizing:
“The plans will impact the EU’s Sustainable Finance Disclosure Regulation (SFDR) – due to be reviewed at the end of the year – European Sustainability Reporting Standards (ESRS) under the CSRD, the ESG Ratings Regulation, EU Green Bond Standard and sustainability requirements under Solvency II. In total, 24 technical measures related to these regulations have been listed as ‘non-essential’.”
This list of measures on the chopping block has become known as the Commission’s “kill list.” There may be strong political pressure driving this action from the Commission – in particular, trade pressure from the United States. Reporting from the Financial Times reveals that the US is exerting significant pressure on the EU to walk back sustainability legislation:
“According to a US government position paper seen by the Financial Times, Washington has asked Brussels to scrap requirements for non EU companies to provide ‘climate transition plans. It has also demanded that the bloc change environmental legislation on supply chains to exclude US companies and others from ‘countries with high quality corporate due diligence’.”
The US wants rollbacks on multiple sustainability laws, including CSRD, CSDDD, CBAM, EUDR, and more. It just so happens that the Commission’s “kill list” includes CSRD phase-in requirements for non-EU companies to report on sustainability at the parent level. This provision is a sticking point for the US Administration. Regulations on the “kill list” may be postponed indefinitely. Additionally, the Commission could propose amendments or repeals to the Council and Parliament.
Our members can learn more about sustainability reporting in the EU here.
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