The Council of the European Union is discussing the possibility of raising the threshold for companies in scope of the bloc’s corporate due diligence rules to those with more than 5,000 employees and €1.5 billion net turnover, according to leaked documents.
A draft of the Council’s fourth compromise text says that, while the European Commission did not suggest revising the scope of the Corporate Sustainability Due Diligence Directive (CSDDD) in its February Omnibus proposal, the Polish presidency “sees a merit in exploring the possibility” of limiting it to larger companies.
“In the presidency’s view, such largest companies are able to have the biggest influence on their value chain and, at the same time, are best equipped to absorb the costs and burdens of due diligence process,” the document says.
The leaked draft proposal would see the scope of the directive drastically reduced. As it stands, it covers firms with more than 1,000 employees and €450 million in net turnover.
While the scope of the Corporate Sustainability Reporting Directive (CSRD) has been heavily debated by the Council, this is the first time changes to the CSDDD threshold have been discussed.
On the European Parliament side, the lead Omnibus negotiator, Swedish MEP Jörgen Warborn, has proposed watering down the scope of the regulation to companies with 3,000 employees and €450 million in net turnover.
The presidency has also proposed postponing the transposition deadline of the regulation by one year to July 2028.
“As discussed in the context of the ‘stop the clock’ proposal, in the presidency’s view, companies should be given sufficient time to set up relevant due diligence processes,” it wrote.
The text will form part of the discussions on the revision to the CSRD and CSDDD at a member state representative meeting on Wednesday 18 June.
An EU source said the discussion had been confirmed for Wednesday, and the presidency’s intention is to reach an agreement at this level so that the file can be adopted at next week’s general affairs council meeting.
Further changes
The Council also proposed a series of other amendments to CSDDD.
These include simplifying the provisions for climate change mitigation transition plans by aligning them with CSRD – as previously discussed – and delaying the requirement to adopt transition plans by two years to 2030.
It would also be clarified that companies through their transition plans “contribute to” limiting global warming in line with the Paris Agreement, rather than saying the plans “are compatible” with doing so.
The Council said the European Commission should issue guidelines on transition plans, including practical guidance on sectoral pathways to adequately assist companies in designing their plans, as well as for supervisory authorities.
It also suggested limiting the due diligence obligations to a company’s own operations, subsidiaries and direct business partners.
Warborn has proposed scrapping transition plan requirements altogether.
The presidency also expanded on its proposal for identifying and assessing actual and potential impacts, which it said is based on the “risk-based approach”, where the focus is placed on areas where these impacts are most likely to occur.