The trilogue negotiations between the Commission, the European Parliament and the Council commenced on 18 November. Before the negotiations, the Council published a four-column table outlining the initial positions of the negotiating parties on the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).
In this ESG update, we set out the key differences between the positions of the trilogue parties with regard to the CSRD: the scope and the value chain cap.
Scope
As to the CSRD’s scope, the Council and the European Parliament agree on the net turnover threshold for EU companies and for non-EU companies with securities listed on an EU regulated market. However, they differ over the employee headcount thresholds, which the Council would set at 1,000 employees, and the Parliament at 1,750 employees.
For non-EU companies without securities listed on an EU regulated market, the positions of the Council and the European Parliament diverge significantly. The Council maintains the requirement for a non-EU company to have a specified net turnover within the EU. In contrast, the European Parliament proposes removing the EU net turnover requirement, instead introducing a single criterion: whether a non-EU company has an EU subsidiary or branch that meets a specified global net turnover threshold.
Value Chain Cap
Both the Council and the Parliament include a value chain cap in the CSRD and CSDDD, but they differ on the exact thresholds and the practical operation of the cap. The Council aligns with the Commission’s position that companies should not request sustainability information from companies in their value chain with fewer than 1,000 employees (unless such information is within the scope of the voluntary standards or commonly shared between undertakings in the relevant industry/sector). The Council, however, proposes to remove the provision for information that is “commonly shared” in the relevant industry/sector. Further, the Council submits that clauses in agreements pursuant to which information beyond the scope of the voluntary standards is requested will not be binding in this context. The European Parliament applies an increased employee threshold (being 1,750 employees) and a net turnover requirement (being EUR 450 million). Further, the European Parliament adds requirements to explain efforts made to obtain value chain information.
The differing positions on the CSRD and CSDDD are currently under active discussion. Having begun last week, the trilogue negotiations began are expected to conclude by early December. The overarching goal of adopting final legislation by the end of 2025 remains unchanged, but the shape of the legislation will fully depend on the compromises reached during these negotiations.
The trilogue negotiations between the Commission, the European Parliament and the Council commenced on 18 November. Before the negotiations, the Council published a four-column table outlining the initial positions of the negotiating parties on the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).
In this ESG update, we set out the key differences between the positions of the trilogue parties with regard to the CSRD: the scope and the value chain cap.
Scope
As to the CSRD’s scope, the Council and the European Parliament agree on the net turnover threshold for EU companies and for non-EU companies with securities listed on an EU regulated market. However, they differ over the employee headcount thresholds, which the Council would set at 1,000 employees, and the Parliament at 1,750 employees.
For non-EU companies without securities listed on an EU regulated market, the positions of the Council and the European Parliament diverge significantly. The Council maintains the requirement for a non-EU company to have a specified net turnover within the EU. In contrast, the European Parliament proposes removing the EU net turnover requirement, instead introducing a single criterion: whether a non-EU company has an EU subsidiary or branch that meets a specified global net turnover threshold.
Value Chain Cap
Both the Council and the Parliament include a value chain cap in the CSRD and CSDDD, but they differ on the exact thresholds and the practical operation of the cap. The Council aligns with the Commission’s position that companies should not request sustainability information from companies in their value chain with fewer than 1,000 employees (unless such information is within the scope of the voluntary standards or commonly shared between undertakings in the relevant industry/sector). The Council, however, proposes to remove the provision for information that is “commonly shared” in the relevant industry/sector. Further, the Council submits that clauses in agreements pursuant to which information beyond the scope of the voluntary standards is requested will not be binding in this context. The European Parliament applies an increased employee threshold (being 1,750 employees) and a net turnover requirement (being EUR 450 million). Further, the European Parliament adds requirements to explain efforts made to obtain value chain information.
The differing positions on the CSRD and CSDDD are currently under active discussion. Having begun last week, the trilogue negotiations began are expected to conclude by early December. The overarching goal of adopting final legislation by the end of 2025 remains unchanged, but the shape of the legislation will fully depend on the compromises reached during these negotiations.