Remarks by Commissioners Dombrovskis and Albuquerque on the proposals to simplify rules on sustainability and EU investments

Commissioner Valdis Dombrovskis

Good afternoon.

Let me begin with the big picture.

The world is changing before our eyes.

We see dramatic shifts in the geopolitical landscape.

This week alone, we saw a long-standing strategic partner vote against a UN resolution condemning Russia's aggression against Ukraine.

We need to treat these developments as a call to action.

The freedoms that we enjoy and the values that we cherish can no longer be taken for granted in a complex world.

For the EU, they also depend on maintaining and further developing our economic base by adapting, innovating, and competing in the world. In short, we need to build a more competitive Europe.

Earlier today, my colleagues presented the Clean Industrial Deal and an action plan to bring down energy prices as part of that effort.

Cutting red tape is another important element to achieve more competitive Europe.

Put simply, we cannot hope or expect to successfully compete in a perilous world with one hand tied behind our backs.

The past five years have been a period of intense regulatory activity.

While our commitment to securing the green transition has not wavered, we must acknowledge that this has come at a cost, generating a large regulatory burden on people and businesses.

As we take stock, we see that this accumulation of rules, and their increased complexity, are limiting our economic potential and our prosperity.

Today, regulation is seen by more than 60% of EU companies as an obstacle to investment. 55% of SMEs flagging regulatory obstacles and administrative burdens as their greatest challenge. In Europe, small and medium-sized enterprises (SMEs) constitute approximately 99% of all businesses.

They are most at risk of being suffocated by administrative burdens. They are Europe's economic engine, for whom we are speaking and acting with today's proposals.

I also want to be very clear that we remain deeply committed to building a greener and fairer society and economy.

Simplification is about making sure that EU rules help deliver – rather than impede – the achievement of our economic, social, environmental and security goals.

It is about achieving those goals in a smarter and less burdensome way.

Less bureaucracy means more innovation and investment [that will secure our long-term prosperity.]

It means creating new and quality jobs for European workers.

It provides citizens with the opportunity to stay, live and work in any region of Europe, from Portugal to Finland.

Today's simplification proposals also help to ensure that responsible European companies can continue to invest and do business across the world.

The alternative is retreating and ceding the ground to competitors who do not necessarily share our values nor working methods.

Taken all together, that is why we have committed to this ambitious and far-reaching simplification agenda.

Let me now outline today's proposals.

Companies and stakeholders have repeatedly stressed the need to ensure certainty.

Today, we proposed a “stop-the-clock” to delay the application of the Corporate Sustainability Reporting Directive (CSRD) for companies that have not started reporting yet.

We also proposed to delay the transposition and application of corporate sustainability due diligence (CSDDD).

This seeks to avoid a situation in which companies that are required to report for the 2025 financial year (second wave) or 2026 (third wave) are then subsequently relieved of this requirement, incurring unnecessary and avoidable costs.

We will propose to the co-legislators to subject this proposal to a fast-track adoption.

Moving to sustainability reporting.

Firstly, we are freeing around 80% of companies currently under the scope of the CSRD from very burdensome reporting requirements.

Secondly, we are limiting the information that larger companies under the scope of the CSRD can request from smaller companies not in scope – benefitting especially SMEs.

Thirdly, we will review the European Sustainability Reporting Standards, with a view to streamlining them substantially and making them easier for companies to use.

Finally, we are lifting the mandate to adopt sectoral-specific standards and the possibility of moving from a requirement for limited assurance to a requirement for reasonable assurance.

We are therefore providing clarity that there will be no future increase in auditing costs for companies in scope related to sectoral-specific standards and the possibility of moving from a requirement for limited assurance to a requirement for reasonable.

On due diligence, we are extending the scope of maximum harmonisation, targeting due diligence, as a general rule, to direct business partners.

At the same time, the proposal recognises that there can be situations where companies have to look beyond their direct business partners when, for instance, they become aware of possible harmful activities at the level of an indirect supplier.

We are extending the intervals in which companies need to regularly assess the adequacy and effectiveness of due diligence measures, from one to five years.

This will significantly reduce burdens not just for in-scope companies but also for their business partners, which would receive (detailed) information requests as part of these monitoring exercises.

Regarding penalties, we are moving towards a more proportionate regime, that shall be “effective, proportionate and dissuasive”, and longer linked to a percentage of global net turnover.

Finally, we are moving away from the EU-wide civil liability regime conditions while preserving the right to full compensation for victims under the civil liability regimes of Member States.

Lastly, I turn to Taxonomy. Today the College proposed making Taxonomy reporting more proportionate, proposing that only very large companies (above 1,000 employees, and €450 million turnover) are required to report every year on their Taxonomy alignment.

This amendment will free more than 80% of companies from compulsory Taxonomy reporting.

We are also presenting unprecedented simplification changes to the Carbon Border Adjustment Mechanism (CBAM).

We are doing this on basis of reporting and data gathered during the CBAM transitional phase where we learnt that tens of thousands of small importers were subject to the CBAM, but their imports represented only about 1% of CO2 emissions.

With a new threshold we are eliminating CBAM obligations for approximately 182,000 or 90% of importers, most of which are SMEs.

This is expected to bring about €1.12 billion in savings while still covering over 99% emissions in scope.

The new threshold will also bring cost savings to public authorities in Member States worth approximately €87.5 million, through less processing of importers who are now exempt.

This is a clear example of the win-win scenario that simplification can bring about: achieving our green objectives while strengthening our economy.

We also propose to optimise and simplify the functioning of several investment instruments including InvestEU, the European Fund for Strategic Investments (EFSI) and other legacy financial instruments. This proposal is breaking new ground.

First, it entails a substantial reduction of administrative burden for our implementing partners, financial intermediaries and final recipients, notably the SMEs. These simplification measures are expected to generate a total of around €350 million in cost savings.

Secondly, we also propose measures to increase the real investment capacity under InvestEU to mobilise around €50 billion in additional public and private investments. This will help address existing and emerging new priorities and direct the additional investment capacity in support of priority policies, such as the ones outlined in our Competitiveness Compass and the Clean Industrial Deal.

Today's first two omnibus packages mark a strong start to delivering our simplification agenda.

A conservative estimate puts the annual savings stemming from these packages at €6.3 billion.

Our next proposals will target small mid-caps, farmers and changing paper reporting into a digital one.

We are determined to deliver.

Our future prosperity and security depend on us taking action now. I will stop here. Thank you.

Commissioner Maria Luís Albuquerque

Good morning,

We started this exercise of simplification with two objectives in mind:

• Alleviate burdens that are unnecessary and that create complexity without much value added
• Keep in line with our Green Deal objectives.

We need to achieve these two goals, as they are essential to regain competitiveness. And they are not incompatible, we can achieve both. And we should be ambitious in the simplification we bring about.

We can only achieve simplification if we also look for simplicity and coherence. A simplification exercise delivering simplicity seems obvius, but in any case, good to keep in mind. Likewise with coherence: coherence between different pieces of legislation and coherence within the text itself.

One further element to keep in mind when trying to deliver simplification is proportionality. We need to keep in mind how requirements can be implemented by different companies.

Urgency another element we need to bear in mind in this exercise. And what and why we do it for – competitiveness that can provide wellbeing for our people.

With this setup in mind, we have looked at how to simplify our sustainable finance rules – namely the Corporate Sustainability Reporting Directive (CSRD) and the Taxonomy –

How do we see this package delivering on all these goals – competitiveness and sustainability which should go hand in hand?

First, the “stop the clock proposal” delivers on simplicity, coherence, proportionality, as it will allow companies that will be descoped from CSRD to have legal certainty that they do not need to prepare for the reporting ahead of a final decision in this regard.

Second, the changes to CSRD are delivering substantial and ambitious simplification, in a proportionate way:

• Around 80% of companies will be descoped from CSRD; some of them will continue reporting voluntarily. Now the CSRD rules will apply to all companies with more than 1000 employees or a turnover above €50 million
• Those reporting voluntarily will have a simplified standard that would ensure consistency and comparability, to be adopted via a delegated act;
• The scope of CSRD will be more aligned with that of the CSDDD;
• Companies that are not reporting and that are included in the value chain of larger companies in scope will be protected from excessive requests to provide information if they have up to 1 thousand employees, thus reinforcing and strengthening the current value chain cap;
• It would apply directly to the reporting company instead of being only a limit on what ESRS can specify. And it would require that assurance providers respect the obligation that undertakings do not seek more information than that covered by the voluntary standard;
• Likewise, by removing the requirement to move from limited assurance to reasonable assurance we also ensure that companies will not have to shoulder future costs;
• Sector-specific standards will no longer be developed;
• We are making taxonomy reporting voluntary for companies which have a turnover below four hundred and fifty million (450) euro.

Third, this package will be complemented by a re-assessment of the European Sustainability Reporting Standards to reduce datapoints and, in sum, make the reporting more meaningful and focused.

Fourth, we are also publishing a four weeks consultation, amendments to the taxonomy Disclosure delegated act and the environment and climate delegated act (level 2). The adjustments we are making to these two delegated acts will allow us a very significant alleviation:

•   For companies remaining in scope and those that wish to voluntarily report, the simplification measures will eliminate almost 70% of the data points of the reporting templates.
• We are introducing a materiality threshold of 10% into taxonomy. Companies can then focus their efforts of assessing Taxonomy- compliance (e.g., eligibility and alignment) of the activities that represent a significant share of their revenues, capital or operational expenditures;
• We further reinforce the proportionality of the taxonomy by allowing companies not to report on alignment of operational expenditure (OpEx) if their eligible activities do not exceed 25% of their cumulative turnover;
• Non reporting entities will be excluded from the denominator of the green asset ratios, applicable to banks;
• We postpone until 2027 the application of trading book KPI, and Fees and Commission KPI for banks;
• We simplify and shorten the reporting templates, leading to a reduction of 66% for non-financial undertakings and of 89% for credit institutions;
• We simplify certain provisions under the generic criteria for “Do no significant harm” to pollution prevention and control regarding the use and presence of chemicals. This will facilitate compliance and significantly reduce administrative burdens on reporting companies that operate in all economic sectors under the Taxonomy.

As I mentioned, we are keeping the ambition of our Green Deal. How?

• By ensuring we keep in scope the largest companies which are more likely to have an impact on environment and people;
• By re-assessing the information and datapoints that are really needed (and not nice to have) we make reporting more meaningful and focused – as all those in need of information will more easily find what they are looking for;
• By giving companies a choice to opt out of some of the reporting requirements, we create space for the companies to make their own assessment on the usefulness of such reporting – and therefore, transform the reporting from a mere compliance instrument into a strategic reflection;
• By explaining that reporting on partial alignment is possible under the taxonomy, we also foster gradual environmental transition, in line with the objective of scaling up transition finance;
• And by ensuring that a central element of the Green Deal – the double materiality – is preserved.

Thank you.