European Parliament Dramatically Limits Corporate Sustainability Reporting Directive: Most Companies Exempted in Deference to Anti-ESG Sentiment Among Allies

     A week or so ago, I posted about the EU’s Corporate Sustainability Reporting Directive, giving the pros and cons. Now the European Parliament has basically defanged the directive, voting to exempt 92% of companies from the rule, which would have required ESG reporting. The new legislation still must be approved by European member states. Concerns raised by America’s fossil-fuel industry and the American Chamber of Commerce were key to the vote, according to one member of the Parliament. As Bloomberg notes, ESG has been vilified by the Trump administration as “woke.” They also note that in the EU, concerns about ESG are mostly cost concerns. Other lawmakers said the EU must balance sustainability and competitiveness and compromise with the views of partners and stakeholders like the U.S. and U.S. companies, both of which have expressed views opposing the directive.

     The requirement that companies must produce climate transition plans has been dropped, as well as a proposal to introduce EU-wide civil liability.

     Bloomberg notes:

“Lawmakers didn’t address the issue of extraterritoriality, whereby countries outside the EU need to comply with its ESG rules if they target the bloc’s markets. But with other parts of the legislation effectively wiped out, lawmakers said the cuts approved by the parliament remove many of the issues that had triggered concern in the US.”

     A spokesperson for the U.S. Chamber of Commerce welcomed the changes but still expressed concerns about extraterritoriality. Bloomberg also noted that a large-scale regulatory simplification process was happening in the EU in order to increase competitiveness. They also report:

“CSDDD will be limited to companies with more than 5,000 employees and an annual revenue of €1.5 billion. Noncompliance can only be litigated on a national level and could trigger compensation to victims and fines, according to guidelines set by the commission and member states.”

     It is unclear how this will affect ExxonMobil’s threat to move out of the EU due mainly due to the potential of the large fines for non-compliance.  

 

 

References:

 

EU Parliament Votes to Cut ESG Regulations Amid US Pressure. Frances Schwartzkopff. Bloomberg.November 14, 2025. EU Parliament Votes to Cut ESG Regulations Amid US Pressure