Adept ESG Structure: Balancing Environmental, Social, and Governance Responsibilities while Simplifying Regulatory Demands
The European Union (EU) is embarking on a mission to simplify its regulations, with a particular focus on sustainability reporting and due diligence obligations. The EU Commission has proposed a series of amendments aimed at easing the burden on small and medium-sized enterprises (SMEs).
One of the key proposals is the simplification of the Taxonomy 'Do No Significant Harm' criteria. This move is intended to make the criteria more accessible and easier to understand. The European Commission has also instructed the European Financial Reporting Advisory Group (EFRAG) to revise materiality assessments guidelines, encouraging companies to prioritize a smaller set of data points.
Secondary legislation is also under review, with a focus on addressing inconsistencies and duplications in ESRS accounting standards and value chain data collection requirements. The aim is to create a more coherent and efficient regulatory framework.
The EU is also proposing targeted amendments to align and simplify definitions in primary legislation. This includes a 'bureaucracy check' for new legislation to prevent overlapping regulatory requirements.
Simplification of the Green Claims Directive is a priority, despite no political agreement having been reached yet. The goal is to remove duplications and ineffective provisions, and to increase de-minimis exemptions.
In addition, the EU Commission has made recommendations for the ESG Omnibus adoption. These recommendations propose broad simplifications, including raising reporting thresholds to companies with over 1,000 employees, postponing obligations for new companies to 2027, simplifying ESRS standards, offering a voluntary SME standard (VSME), exempting companies under €450 million revenue from taxonomy reporting, and limiting assurance to a reduced level ('limited assurance').
For more information about these changes, please visit our website. The EU is committed to making its regulations more efficient and less burdensome, particularly for SMEs, as part of its ongoing efforts to promote sustainable growth and development.
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