Mr. Colm Forde:

Good afternoon Cathaoirleach and members of the committee. I thank the committee for the opportunity to appear before it today to discuss the European Commission’s omnibus proposal on simplification and, in particular, its implications for the corporate sustainability due diligence directive and corporate sustainability reporting directive. I welcome the committee’s engagement on this important matter.

I am the assistant secretary in the Department’s commerce, consumer and competition division. I am accompanied this morning by my colleagues Mr. Conor Verdon and Mr. Colm O'Neill. Mr. Verdon is a principal officer in the Department’s company law audit and accounting policy and legislation unit, with responsibility for the corporate sustainability reporting directive, and Mr. O'Neill is an assistant principal officer in the Department’s company registration and regulation policy unit with responsibility for the corporate sustainability due diligence directive. Before we get into the substance of the omnibus proposal on sustainability, it is worthwhile to give some context to what has led the Commission to publish the omnibus proposals. There have been a variety of initiatives at EU level over the past two decades but the issue of disproportionate administrative burdens on business has remained a persistent challenge. Today, regulation is seen by more than 60% of EU companies as an obstacle to investment and 55% of SMEs across Europe say that regulatory obstacles and administrative burdens are their greatest challenge. There has been a significant step change at EU level with regard to simplification and burden reduction, following on from the Letta and Draghi reports in 2024. The importance of reform is being pushed strongly by the European Council, which last October called for a simplification revolution by ensuring a clear, simple and smart regulatory framework for businesses and reducing administrative, regulatory and reporting burdens, in particular for SMEs.

In March 2025, Council emphasised the need to simplify and drastically reduce, as a matter of urgency, administrative, regulatory and reporting burdens; called for streamlined EU legislation that fosters a clear, simple, and innovation-friendly regulatory framework; urged the European Commission and colegislators to adhere to better regulation principles and avoid over-regulation; and ensure that small and medium-sized enterprises are not disproportionately affected.

The Commission’s work programme for 2025 indicated the intention to bring forward a number of so-called omnibus packages and simplification proposals in the context of strengthening EU competitiveness. The first of these omnibus packages, omnibus I and II, was published on 26 February 2025 with the aim of balancing the EU’s ambition towards a sustainable transition with the enhancement of EU companies’ competitiveness. The package of proposals includes amendments to the corporate sustainability reporting directive, the corporate sustainability due diligence directive, the carbon border adjustment mechanism and the InvestEU regulation and is accompanied by a draft taxonomy delegated Act for public consultation. Further omnibus proposals have recently been published relating to the Common Agricultural Policy and for small, mid-cap companies. The Department of Enterprise, Tourism and Employment has responsibility for both the CSRD and CSDDD and I will go into some detail on the Commission’s proposals in relation to these directives.

The corporate sustainability reporting directive is the EU’s response to the global reframing of company reporting to include environmental, social and governance matters. It entered into force in January 2023 and arose from the European Green Deal and the EU action plan for financing sustainable growth. The aim of the CSRD is to harmonise the EU rules for sustainability reporting by companies, putting it on the same footing as financial reporting. It ensures that investors and other stakeholders have access to information to assess investment risks arising from climate change and other sustainability issues. While it is, in essence, a reporting directive, its impact aims to contribute to a more strategic and focused approach across companies on sustainability matters.

Ireland was among the first countries in the EU to transpose the CSRD and did so before the 6 July 2024 deadline. The European Commission’s webpage shows that infringement proceedings are pending against seventeen member states, due to the lack or delay of the notification of national transposition measures or their incompleteness. The on-time transposition of the directive into Irish law was welcomed by stakeholders, giving clarity and certainty to those obliged to prepare their first reports for the 2024 financial year, to be published this year. The CSDDD provides that in-scope companies must, for the first time, conduct risk-based human rights and environmental due diligence and integrate due diligence into all corporate policies and risk management systems.

The CSDDD was published in the Official Journal of the European Union on 5 July 2024 and gave member states until 26 July 2026 to transpose the directive into national law. The Department has undertaken substantial stakeholder engagement on both directives. When the CSRD entered into force on 5 January 2023, the Department held a stakeholder webinar to discuss the implementation of the directive. There were nearly 500 participants on the day with presentations from the European Financial Reporting Advisory Group, EFRAG, the Commission and the then Minister of State, Deputy Calleary. From feedback we received, we understand that the event was very well received by those attending.

The Department also launched a public consultation, which closed in March 2023, on the member state options in the CSRD, which received 34 detailed and substantive responses that were analysed and used to inform policy decisions. The Department again briefed stakeholders at a webinar on 4 July 2023, with more than 250 attendees, on the policy decisions made and published the policy paper on its website. The Department consulted with our own agency, the Irish Auditing and Accounting Supervisory Authority, IAASA, the Central Bank of Ireland and the other regulatory bodies under the Companies Act 2014 on the transposition of the CSRD. Post transposition, the Department continued to engage with stakeholders to disseminate information on the CSRD. In November 2024, the Department of Enterprise, Tourism and Employment, participated in the joint IAASA and Irish Accounting and Finance Association, IAFA, conference on sustainability in accounting education at Maynooth University and also in a panel discussion hosted by Trinity Business School, involving a range of stakeholders from industry and private practice.

Since the publication of the omnibus proposals, officials from the Department, both in Dublin and Brussels, have engaged with a range of stakeholders and received numerous submissions concerning the content and implications of the proposals. These include representations from civil society and business organisations. All submissions are welcome and reviewed. Officials have also presented to the Department's enterprise forum on the CSRD and CSDDD and, more recently, with the Department's responsible business forum on the proposed changes in the omnibus on sustainability.

The Department continues to engage with key stakeholders, providing updates and responding to queries via dedicated mailboxes: csrd@enterprise.gov.ieand csdd@enterprise.gov.ie.

The omnibus on sustainability has proposed a number of legislative changes to both the CSRD and CSDDD. There are two separate proposals contained in Omnibus I, the so-called "stop the clock" and "content" proposals. The stop the clock proposal, which will postpone reporting requirements for certain cohorts of companies under CSRD and extend the deadline for transposition of the CSDDD by one year to July 2027, has already been adopted by the colegislators, with the European Parliament voting in favour of adopting the stop the clock directive by an overwhelming majority, with 531 votes for, 69 against and 17 abstentions. The Department is working with the Office of the Parliamentary Counsel to transpose the stop the clock directive and is expected to achieve this very shortly, giving certainty to all of our stakeholders. The content directive provides for the more substantive changes to the directives.

There are a number of areas the committee has indicated that it has an interest in and I will briefly address some of them now before we get into more substantive discussions this afternoon. The proposed changes to the CSRD aim to focus the sustainability reporting obligations on the largest companies, which are more likely to have the biggest impacts on people and the environment. To do this, the Commission intends to remove approximately 80% of companies from the scope of the CSRD, restricting the application of the requirements to those companies having 1,000 or more employees, as opposed to 250 employees under the current law. The proposed changes aim to ensure that sustainability reporting requirements on large companies do not burden smaller companies in their value chains through the introduction of the value chain cap. The value chain cap proposal is for companies that will not be within the scope of the CSRD anymore - up to 1,000 employees - whereby the Commission would adopt by delegated act a voluntary reporting standard, based on the standard for SMEs developed by the European Financial Reporting Advisory Group. That standard will act as a shield by limiting the information that companies or banks falling into the scope of the CSRD can obtain from companies in their value chains with fewer than 1,000 employees.

The changes to the CSDDD will significantly reduce the administrative burden on businesses without undermining the directive’s policy objectives. The proposals retain the directive’s risk-based approach and provide that, as a general rule, due diligence is limited to a company’s direct suppliers unless the company has information to suggest the possibility of adverse impacts at the level of indirect business partners. There is nothing to prevent companies from engaging with stakeholders such as NGOs and civil society that may have valuable information about adverse environmental or human rights impacts. For SMEs that are direct business partners of in-scope companies for both CSRD and CSDDD, the amount of information they are required to provide during due diligence mapping will be limited, especially for those with fewer than 500 employees.

It is important that businesses have guidance on these proposed measures. The Department maintains a dedicated CSRD page on its website, and this will continue to be updated and reviewed as changes are implemented. At EU level, the European Commission similarly maintains a highly comprehensive web page bringing together all of the appropriate guidance and resource materials from an EU perspective. To reduce the administrative burden on companies, the omnibus proposes that the European Commission will bring forward the date for the publication of general due diligence guidelines for the CSDDD to July 2026. With the first group of companies not due to report until July 2028, this two-year interval should provide companies with enough time to prepare.

The Minister for Enterprise, Tourism and Employment, Deputy Peter Burke, has been very clear that he is supportive in principle of initiatives to simplify the reporting requirements and reduce costs on companies, most especially SMEs. There is strong political will at EU level behind the omnibus proposals. The European Commission has voiced a strong ambition to have the proposed changes agreed quickly. The European Council has called on the Commission and colegislators to take work forward on the omnibus simplification packages as a matter of priority and with a high level of ambition with a view to finalising them as soon as possible in 2025.

The Minister has said that he supports the Commission’s proposed changes and their being agreed at the earliest opportunity to give business the legal certainty that it needs. The omnibus proposals have been discussed at a number of EU fora where member states, including Ireland, have given their opinion on them. This includes European Council summits, Competitiveness Council meetings in February and May, ECOFIN Council meetings this year, every COREPER II discussion since late February and at the Antici meetings, where the proposals are being discussed. Consideration of the proposed changes is ongoing at EU level and the Department is continuing to assess the implications as discussions progress.