France Calls For Delay And Changes To EU Sustainability Laws

France urged the European Commission on Thursday to delay and amend several key European sustainability and environmental due diligence regulations to reduce the bureaucratic burden on businesses. France requested a "massive regulatory pause" on key pieces of legislation, including the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), in a formal submission sent to the Commission this week. The government said that the complexity of these regulations is eroding GDP potential and hindering the competitiveness of businesses, especially SMEs.

France follows in the footsteps of Germany, which has also called for relief measures to make it easier to comply with the EU's green reporting rules. The European Commission is reviewing its overall regulatory simplification agenda, which may reopen settled legislation like the CSRD, CSDDD, and the EU Taxonomy for amendments. However, the idea of such changes has encountered opposition from a number of leading companies, who caution that going back on the rules could mean policy uncertainty and undermine the major investments already undertaken by companies to comply with the new rules.

One of the most important requests from France is for an open-ended delay of the CSDDD's implementation. First proposed in February 2022, CSDDD imposes upon companies a broad set of obligations to address wide-ranging environmental and social issues connected to their supply chains, involving child labor, slavery, pollution, deforestation, and ecosystem destruction. The law, which was passed in May 2024 after much contentious negotiation, went through significant changes to scale down the scope and extend the timeline of this law. Significantly, France was successful in lobbying for the threshold to apply only to firms with over 5,000 employees rather than the initially proposed 500 employees during the legislative process. This ensured that about 80% of companies were excluded from the obligation of the directive.

As part of its most recent proposal, France renewed its demand that the ambit of the CSDDD be restricted to businesses employing more than 5,000 people and with annual revenues exceeding €1.5 billion. It also asked for further simplification of the directive's obligations.

The French government's proposals extend beyond the CSDDD, attacking the CSRD sustainability reporting legislation as well. The CSRD is a centerpiece of the EU's efforts at making companies transparent regarding environmental, social, and governance issues. These regulations require detailed reporting on sustainability data. In current plans, smaller companies will begin reporting next year. France has echoed the German concerns in requesting a delay for smaller firms on reporting obligations and proposed to freeze sector-specific reporting requirements.

Under French's proposal, medium-sized companies also deserve relief on reporting requirements and must be relieved from the heavier rules applicable to listed SMEs. In fact, France is advocating for an extreme reduction of sustainability indicators, as under CSRD, into fewer climate-focused indicators. In the words of the government, such simplification would ease the administrative burden, which in turn would help ease the business-friendliness in France.

France has further reduced the reporting load overall but insisted on greater clarity regarding the requirement of CSRD for companies to include transition plans. The existing directive mandates the inclusion of these plans, based on the goals of the Paris Agreement. However, France suggests a less rigorous approach and claims that transition plans should merely reflect a comparison between a company's targets and those of the Paris Agreement rather than full alignment.

The submission thus underlines an overarching concern from France: Europe's businesses not being competitive. In its reply to the Commission, the French government pointed to the need to establish a "simple and predictable regulatory environment that will help investors and foster the growth of businesses, particularly of SMEs and mid-sized firms.". It also argued that decreasing administrative complexity would be a mighty tool to build up European enterprises and to stand up against the challenges brought on by a shifting global competitive landscape and the "uncooperative policies" of major international competitors.

These are part of the growing debate in the EU regarding balancing the demand for strong sustainability and due diligence regulations with economic realities faced by businesses. On one hand, proponents of the current rules are saying that it is the key to driving the EU's climate and social agenda, while opponents are arguing that over-regulatory demands may end up stifling growth and innovation.

As the European Commission decides what to do next, it must balance these competing priorities. The result of this debate will be crucial for the EU's sustainability ambitions and for the future of corporate regulation in Europe.

(Picture Source: Reuters)