European parliamentarians have asked for even more companies to be cut from the scope of sustainability reporting and human rights due diligence, following the start of a process to streamline existing legislation.

In a set of proposals that emerged on social media, members of the Parliament’s committee on economic and monetary affairs proposed that the threshold or companies caught by the new rules should be lifted to 3,000 employees and turnover of more than €450m.

Original legislation for the CSRD (Corporate Sustainability Reporting Directive) and CSDDD (Corporate Sustainability Due Diligence Directive) applied to companies of 500 employees or more and a turnover of more than €40m. The rules would have caught an estimated 50,000 companies across the EU.

The omnibus process, launched in February, proposed cutting the number by 80% to companies of 1,000 employees or more. The committee’s proposal would cut that number drastically.

The committee says in its proposal: “These changes are of fundamental importance: reducing administrative burden on European companies and focusing on reporting that deliver valuable and comparable information (as opposed to a mere compliance exercise) is essential to boosting Europe’s competitiveness and attractiveness.

Transition revamp

Perhaps more alarming for campaign groups, the committee proposes deleting a provision from the new legislation that gives companies “the obligation … to adopt a transition plan for climate change mitigation, including implementing actions which aim to ensure, through best efforts,” shaping business models and business strategy in line with the Paris Agreement.

Both CSRD and CSDDD have been under fire from nations in the EU for some time but the crux came with the publication of a report from Mario Draghi, former president of the European Central Bank, which said the EU’s sustainability legislation was a “major source of regulatory burden”.

The omnibus process has prompted enormous debate. Last week, the European Central Bank, currently led by Christine Lagarde, expressed concern that too many companies were being cut from the scope of sustainability reporting and human rights due diligence.

In a letter signed by Lagarde, the European Central Bank argued: “As noted in the proposal, the number of undertakings subject to sustainability reporting requirement would be reduced by 80%. This amendment could significantly limit stakeholders’ access to important information.”

The letter even raised the risk that the omnibus proposals would mean “significant emitters” of greenhouse gases could fall outside the scope of disclosure requirements, as would many credit institutions.

In a separate intervention, 31 legal academics published a letter arguing that companies face an increased risk of litigation if the omnibus removes the legal obligation to act on climate transition plans.

Meanwhile, not-for-profit campaign groups, among them Friends of the Earth Europe and Global Witness, have claimed the omnibus process itself is “undemocratic”, “untransparent” and “rushed”.

The omnibus process has some way to run and the unease felt in many quarters about the proposed changes is becoming clear. It is a reform process unlikely to please few who campaign for the environment or those who seek a much lighter regulatory burden for business.