After three sessions of interinstitutional negotiations (trilogues), the Council of the European Union and the European Parliament have not yet found common ground on the Corporate Sustainability Reporting Directive (CSRD) (see EUROPE 12940/29).
“The positions are a bit further apart than expected”, said a source contacted by EUROPE on Wednesday 25 May.
Six points are at the heart of the discussions: - the separation of financial and non-financial auditing; - non-European companies; - exemption of subsidiaries; - the inclusion of listed SMEs; - the content of the reporting requirements and, therefore, the text asks the European Financial Reporting Advisory Group (EFRAG) to set these standards; - the definition of high-risk areas.
While the first two points have not yet been addressed, “technical work still needs to be done”, the source said. It is not yet known whether the negotiating mandate given by the Member States to the French Presidency of the EU Council will be revised.
“The content of the reporting requirements is one of the main sticking points, as the Parliament is quite adamant about its position”, said another source at the Parliament, contacted on Monday 30 May.
The EU Council insists that ‘major impacts’ must be communicated, whereas the Parliament wants to remove the word ‘major’.
The Parliament regrets that the issue of the due diligence has been split into two texts, as some discussions fall within the prerogatives of the Committee on Employment and Social Affairs (EMPL), while it is the Committee on Legal Affairs (JURI) that decides on the CSRD.
“There is a risk of a bottleneck between the information collected by companies and what they will be asked to disclose”, the source continued.
The CSRD text will give a mandate on a long list of items to EFRAG, which will be responsible for setting the reporting standards, while the Parliament wants the employment items to be included.
The level of coverage of subsidiaries by parent company reporting is also problematic, as the Parliament’s negotiating mandate was not entirely clear on this point (see EUROPE 12902/19). “The inclusion of subsidiaries in the reporting has been the subject of lengthy discussions. There was a clear right/left divide, which was not resolved by a compromise amendment”, the source recalled. The European Parliament’s mandate does not therefore include the exemption for subsidiaries, but it remains “loose”, especially as the EU Council is against full inclusion. “It’s about finding a balance”, the source concluded.
The date for the fourth trilogue is not yet fixed.
See the EU Council’s negotiating mandate (in French) ahead of the third trilogue, as suggested by the French Presidency: https://aeur.eu/f/1v8 (Original version in French by Anne Damiani)