Germany is seeking an exemption for thousands of small enterprises from the European Union’s (EU) sustainability reporting rules, as reported by the Financial Times on September 18. Around 50,000 large, medium, and small-sized companies in the EU will be subject to the Corporate Sustainability Reporting Directive (CSRD) rules between 2024 and 2029. German sought to raise the threshold for defining small and medium-sized enterprises (SMEs) from 250 to 500 employees, aiming to reduce the bureaucratic burden on these companies. If the proposal is accepted, between 7,500 and 8,000 companies, which were supposed to report on their environmental and social impacts under the existing CSRD from 2026, could be spared from complying with these rules.

Germany’s proposal is part of a broader endeavor aimed at easing regulatory pressures on EU businesses, which have faced increasing challenges, including surging inflation, workforce shortages, and a protectionist global trade environment. According to ESG Investor, the existing reporting frameworks involve over 5,000 key performance indicators. Moreover, the direct expenses associated with complying with the due diligence requirements are estimated to range from EUR250,000 and 500,000, creating a substantial financial burden on SMEs. Nevertheless, EU policymakers are against making late changes to the new reporting rules, considering that these rules were just adopted this January. Some also believe that reopening discussions on sustainability reporting might undermine the directive’s impact and is also unfair to the companies that have already adjusted their activities to align with new standards.

Sources:

https://www.ft.com/content/4c533c07-a5ae-402d-8c1d-80c2ea416970

https://www.thomsonreuters.com/en-us/posts/esg/csrd-esg-regulations/

https://www.whitecase.com/insight-alert/corporate-sustainability-reporting-new-eu-rules-large-companies-and-listed-smes

https://aws.amazon.com/cn/blogs/smb/the-european-unions-new-sustainability-regulations-for-small-and-medium-businesses-challenges-and-opportunities/