A letter signed by hundreds of high-profile firms, investors and international bodies urges the EU to retain the 500+ employees threshold in the sustainability reporting directive.

Almost 200 oganisations have called on the EU to retain the “core” of European sustainability reporting rules and ignore calls for measures to apply only to Europe’s largest companies.

In an open letter, big names including IKEA, EDF, Nokia and Allianz, call on the EU to ensure the highly contentious Corporate Sustainability Reporting Directive (CSRD) applies to companies of 500 employees or more in the “omnibus” process of reforms.

Recent reports from the European Council and European Parliament have called for a much higher threshold of either 5,000 or 3,000 employees. The European Commission in February proposed lifting the threshold from 500 to 1,000.

‘Clear and stable policy environment’

“To conclude,” the letter says, “responsible business and investors need a clear and stable policy environment to contribute to the EU’s goals for a competitive and sustainable economy.

“Retaining the core elements of the EU sustainable finance rules… is necessary for providing the transparency and certainty needed to achieve growth whilst supporting decarbonisation.”

The omnibus has become a hotly contested issue since the process was launched earlier in February, with much of the focus on how many of Europe’s companies should be subject to the reporting rules and how much they should be reporting.

A report from former European Central Bank president Mario Draghi triggered the reform process with its commentary that the CSRD, along with the Corporate Sustainability Due Diligence Directive (CSDDD)—focusing on the environment and human rights—were damaging EU businesses.

Draghi’s report said: “The EU’s sustainability reporting 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.”

Reporting standards

In addition to the 500+ employee threshold, the latest calls also ask the EU to ensure the reporting standards—European Sustainability Reporting Standards (ESRS)— should be simplified, without losing the “double materiality” approach and its “interoperability” with international standards, including the standards under consultation by the UK government.

The letter also asks the EU to ensure the core elements of the CSDDD remain intact and that it should hold true to the UN Guiding Principles for Business and Human Rights.

CSDDD should also continue to require companies to adopt climate transition plans that include “science-based targets”.

The omnibus has now entered a “negotiation” stage, during which EU institutions will debate and finalise the precise changes. A conclusion is expected later this year.

Reflecting on the newest letter, German business professor Andreas Rasche says: “It’s great to see large and small organisations joining forces here. The signatories include large players … as well as small and mid-sized companies. This the right spirit to carry the discussion forward.”