Tensions are mounting in Europe over the EU’s flagship new sustainability reporting requirements, with the German chancellor calling for change as big corporates align themselves with the new rules.

EU president Ursula von der Leyen is expected to publish plans for a new simplified, “omnibus” directive covering the sustainability and due diligence reporting rules at the end of next month.

But it has become clear that German leader Olaf Scholz has written to von der Leyen, asking for a two-year delay to implementation of the Corporate Sustainability Reporting Directive (CSRD) and the turnover threshold for applying the new rules to be raised.

In a letter seen by the German press, Scholz writes the changes are “urgently necessary” in order “not to overburden companies”.

Scholz says for some companies applying the new standards may mean companies compiling up to 1,000 data points. “In its current form, the added value of the directive is disproportionate to the bureaucratic burden on companies,” Scholz adds.

At the same time, a slew of big companies—including Mars, Nestlé, Primark and Unilever— signed an open letter calling for CSRD and its sister law, the CSDDD (Corporate Sustainability Due Diligence Directive), to be left as they are.

They call on the EU to ensure that the ‘omnibus’ process, due to kick off at the end of February, “will not allow already agreed and adopted legal texts to be reopened for renegotiation”.

The companies are particularly concerned about CSDDD. “A great deal of effort was made by all parties during the negotiation of the CSDDD to ensure the legislation supplemented the [CSRD] without creating any overlapping requirement.”

Sounds like a drag

A battle over CSRD and CSDDD has been ongoing for some time and came fully into the open when former European Central Bank president Mario Draghi delivered his report last year on EU competitiveness, in which he cited reporting regulations as a drag on growth.

He wrote: “The EU’s sustainability and due diligence framework is a major source of regulatory burden magnified by a lack of guidance to facilitate the application of complex rules and to clarify the interaction between various pieces of legislation.”

Draghi’s reticence comes as part of a larger reaction to sustainability topics, some of it prompted by Donald Trump’s return to the White House. US regulators had been working on mandatory climate risk reporting rules but those are now considered unlikely to go ahead.

US companies with overseas divisions may still have to apply CSRD and CSDDD if they want to continue with EU operations because the legislation has an extraterritorial element.

However, at least one US law firm, Latham & Watkins, questions whether their application may become a bargaining chip in future trade clashes between the US and EU. Partners Paul Davies and Betty Huber write for the Harvard business blog that US companies will need to “navigate” potentially diverging approaches between Washington and Brussels.

“This is especially the case if the US seeks to counter the extraterritorial impact of ESG and sustainability regulations (particularly from the EU) through trade negotiations, legislation or other mechanisms,” they write.

Opposition to European rule-making on climate change is becoming. Speaking to Politico, a US website, Andy Barr, a Republican member of the House of Representives financial services committee: “An American first agenda will animate ferocious opposition to a European Union that attempts to impose their costly, burdensome regualtions on American firms.

Climate change remains the world’s biggest strategic risk. Yet it has become a lightning rod around which left and right politics revolve. Part of that merry-go-round is made up of sustainability reporting rules. In the US, the issue is whether to have them at all; in Europe, the fight is over when and how strong. They may yet prove to be a point of collision between major economic blocs.