The EU’s ESG reporting requirements are set to face a stiff challenge as the French government is preparing to submit proposals to curb the scope of ESG regulatory requirements, Bloomberg reported on January 21.

Paris is currently preparing a proposal that would limit the amount of companies that would be subject to the full reporting requirements of the Corporate Sustainability Reporting Directive (CSRD), Bloomberg reported citing a source familiar with the matter.

CSRD has come under criticism from some officials who perceive the reporting requirements as too costly for smaller and medium-sized firms (SMEs).

In addition to France, the German government also stated in December that it would pressure the European Commission’s executive arm to rein in the directive.

The pushback against the ESG regulation comes as new data revealed that Germany’s economy shrank for a second year in a row in 2024, with some business leaders pointing the finger at growing regulation for a loss of competitiveness.

Talks within the EU are expected to continue until February 26 when the EC is slated to meet to discuss the legislation, although timelines could be altered.

Under the current legislation, the CSRD would affect up to 50,000 firms operating in the EU. All companies with more than 250 employees and an annual revenue greater than €50mn ($52mn) would be obliged to report hundreds of ESG statistics.

The news of Brussels potentially rolling back sustainability regulation comes at a time when the US is also distancing itself from environmental regulation with Donald Trump returning to the White House.

On Trump’s first day in Office, he ordered the US to withdraw from the Paris Agreement, although the process of leaving the climate pact takes one year officially, according to the climate initiative itself.