Lawmakers representing a majority in the European Parliament have reached an agreement to significantly scale back the European Union’s corporate sustainability due diligence directive (CSDDD), according to officials and Members of the European Parliament (MEPs).
The CSDDD, adopted in 2024, obliges companies to identify and address human rights and environmental abuses within their global supply chains or face penalties of up to 5% of their worldwide turnover. The directive has been one of the most divisive elements of the EU’s green policy agenda, drawing opposition from several member states, including Germany and France, as well as from international governments such as the United States and Qatar, and corporations including ExxonMobil.
Under the new deal, negotiated late on Wednesday, the law’s scope would be substantially reduced. The rules would now apply only to companies with 5,000 or more employees and annual turnover exceeding €1.5 billion, compared with the previous threshold of 1,000 employees and €450 million.
Jörgen Warborn, the centre-right European People’s Party (EPP) lawmaker leading the talks, said the changes aim to prioritise economic recovery. “I’m focusing on making sure that we put Europe back to growth, so that we can produce more jobs and more long-term prosperity,” Warborn said.
The EPP — the largest political group in the European Parliament — reached the compromise with Socialist and Liberal lawmakers after weeks of negotiations. The European Commission has argued that adjustments are needed to simplify compliance and prevent companies from being overburdened before the directive takes effect in 2027.
However, campaigners and some companies have warned that the proposed revisions could severely weaken corporate accountability and undermine the EU’s sustainability goals.
The Socialists and Democrats (S&D) group said they accepted the compromise reluctantly, after the EPP signalled its intention to negotiate instead with far-right parties. “This compromise is not our preferred option but the alternative was a worse EPP agreement with the far right,” an S&D spokesperson said.
Dutch Socialist lawmaker Lara Wolters, who had led negotiations for the S&D group, announced her resignation in protest at the agreement.
An official from the Liberal Renew Europe group confirmed its support for the deal. Together, the EPP, S&D, and Renew hold a majority of seats in the European Parliament.
The European Parliament is expected to vote on the proposal later this month before entering final negotiations with EU member states to determine the law’s ultimate form.
