Weaken the rules for corporate sustainability reporting! Is Europe going to ease its "green regulations"?

A vote by the European Parliament aimed at easing corporate environmental, social and governance (ESG) reporting obligations is being interpreted by the market as a strong signal that the EU's policy balance is tilting from green ambition to deregulation.

According to the Financial Times of the UK, the European Parliament passed a bill on Thursday, November 13th, to weaken the rules for corporate sustainability reporting, with a significant margin of 382 votes in favor and 249 against. The decisive force in this vote comes from the alliance of the centre-right European People's Party (EPP), the far-right "European Patriots", and the right-wing "European Conservatives and Reformists" party groups.

This move is seen as a response to the call for easing environmental regulations advocated by US President Trump. Manfred Weber, the leader of the EPP, said that this move fulfilled its promise of "reducing red tape". However, for institutions and market participants focusing on sustainable investment, this means that the EU's long-standing leading position in the global green regulatory field may be shaken.

From the perspectives of investors and business operations, the most direct impact of the bill is a significant tightening of the regulatory scope. According to the new regulations, only large enterprises with more than 5,000 employees and an annual turnover of over 1.5 billion euros are required to fulfill due diligence and reporting obligations regarding labor and environmental affairs. A large number of small and medium-sized companies will be exempted.

What is more notable is that the vote abolished the clause requiring companies to prepare a "green transformation plan", which has long been a burden complained about by many enterprises. Although the new regulations retain penalties for non-compliant enterprises, including fines or compensation for victims, they have significantly reduced the compliance costs and pressure on enterprises on the whole.

However, the ultimate fate of the bill remains undecided. It must go through negotiations with the member states of the European Union before it can become formal law. Major economies, including France and Germany, have publicly called for the repeal of the bill, indicating that the future legislative process will be fraught with competition and presenting a more complex policy environment for investors who rely on clear regulatory signals.

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