In a significant shift, the European Parliament’s Committee on Legal Affairs voted on Monday to relax the previously stringent corporate accountability regulations under the European Union’s (EU) landmark corporate sustainability due diligence directive (CSDDD). The directive, which was adopted last year, initially mandated extensive human rights and environmental checks within company supply chains, with non-compliance attracting fines up to 5% of a firm's global turnover.

The revised rules now focus on larger corporations, specifically those with annual turnovers exceeding €1.5 billion and staff counts above 5,000. This adjustment notably reduces the number of companies burdened with these obligations, a move that has sparked a mixed reaction across various sectors.

Further alterations include scrapping plans for an EU-wide civil liability regime and modifying the due diligence requirements to promote a risk-based approach. This means companies now have more flexibility in how they monitor and rectify issues within their operations and supply chains.

The decision has faced criticism from various stakeholders who argue that it undermines corporate accountability by limiting oversight to only very large companies. Despite these concerns, the vote in the committee showed a considerable majority in favor, with 17 votes supporting the amendments, six against, and two abstentions.

Jörgen Warborn, serving as the rapporteur and a member of the center-right European People’s Party, defended the amendments. He emphasized that the changes are meant to simplify compliance for businesses, thereby reducing costs, boosting competitiveness, and supporting Europe's green transition without overwhelming smaller enterprises with complex reporting demands.

The European Commission had initially proposed a dramatic reduction in the number of companies required to conduct social and environmental reporting by as much as 80%. The compromise reached, while still significant, aims to balance corporate accountability with practical business operations, striving to maintain Europe's stance on sustainable business practices without stifling economic growth.

The revised directive now awaits further discussions and final approval in the wider European Parliament, where it is expected to face rigorous debate from all sides of the political spectrum. As Europe continues to lead on environmental and human rights issues in business, the world watches to see how these changes will impact the global conversation on corporate responsibility.