What do the proposed changes to the EU’s sustainability laws mean for New Zealand exporters?

The European Commission’s proposals to substantially alter the European Union’s sustainability laws took many by surprise when they were announced last week.

These proposed changes create greater uncertainty and a sense of “regulatory whiplash” for New Zealand exporters at a time when they also face challenging economic and geopolitical conditions. We are seeing increasing fragmentation and a more disorderly transition as different states and trading blocs pursue conflicting agendas while trying to balance geopolitics, economic growth, and sustainability.

The Commission’s “Omnibus” proposals

The Omnibus package proposes amendments to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), as well as other sustainability laws. The Commission has proposed these changes to “simplify”, reduce the compliance burden on European businesses, and increase their global competitiveness.

The proposed changes go far beyond the anticipated 25% cut in regulatory burden:

• For the CSRD, 80% of companies currently in scope will drop out altogether. The remaining companies will not have to comply until 2028, and by then, the reporting standards are expected to have been significantly reduced.
• The CSDDD will also be delayed by one year, have a reduced scope and potential liability, and companies will only be required to assess the adequacy and effectiveness of their supply chain due diligence once every five years, rather than annually.

If the proposals are adopted, fewer New Zealand exporters will be directly or indirectly affected:

• European companies will only be required to report under CSRD if they have 1,000 employees (up from 250) and either EUR50 million turnover or EUR25 million in assets.
• Non-EU companies with an EU subsidiary or branch meeting certain criteria will only be required to report if they have EUR450 million turnover in the EU (up from EUR150 million).
• CSRD reporting entities will only have to provide detailed information from companies in their value chain (i.e., New Zealand exporters) with more than 1,000 employees.
• The CSDDD’s requirements for European companies to conduct detailed mapping and in-depth analysis of their supply chains will apply only to direct business partners.
• European reporting companies will largely be restricted in the scope of questions they can ask of New Zealand exporters with fewer than 500 employees, limiting them to the more voluntary sustainability reporting standards.

It is important to note that these proposals are not final and still need to progress through the legislative process with the European Council and European Parliament before becoming law. Current estimates suggest the substantive reform package could be in place by mid-2026, with the postponement proposals likely to pass more quickly due to urgency.

What should New Zealand businesses do?

New Zealand exporters should engage with their key customers in Europe to determine whether those customers remain reporting entities, have delayed reporting requirements, or are no longer in scope for mandatory reporting. Exporters may also find that their European customers continue to pursue voluntary reporting.

While the regulatory goalposts are shifting, the underlying commercial and scientific imperatives remain. Customers and consumers remain focused on sustainability, and New Zealand exporters need to meet those expectations to access premium sales channels.

Further, reporting regulation does not directly impact the climate, and New Zealand exporters should continue to assess how climate-related risks and opportunities may affect their businesses.

Yes, it is a complex landscape, but New Zealand exporters can focus on their “no regrets” options:

• Embed climate considerations into corporate strategy.
• Take real-world action to reduce emissions and increase resilience.
• Be prepared to substantiate sustainability credentials.

Taking a long-term view will ensure businesses are well-placed when the regulatory pendulum swings back.