The European Parliament has approved a provisional agreement with EU governments to revise sustainability reporting and due diligence requirements, narrowing the scope of companies covered and easing several obligations in an effort to boost the bloc’s competitiveness.
Under the updated rules, mandatory sustainability reporting will apply only to EU-based companies employing more than 1,000 people and with a net annual turnover exceeding €450 million. The requirements will also extend to non-EU companies generating more than €450 million in turnover within the EU, as well as their subsidiaries and branches with EU turnover above €200 million.
Reporting obligations will be simplified, with sector-specific disclosures becoming voluntary. Lawmakers also agreed to protect smaller firms from additional compliance burdens, ensuring that companies required to report cannot transfer reporting responsibilities to business partners with fewer than 1,000 employees. Smaller companies will not be required to provide information beyond what is set out in voluntary reporting standards. To support implementation, the European Commission will establish a digital portal offering templates and guidance on EU and national reporting requirements.
The revised framework also significantly limits the scope of due diligence obligations. Only large EU companies with more than 5,000 employees and a net annual turnover above €1.5 billion, along with non-EU companies exceeding the same turnover threshold in the EU, will be required to carry out due diligence on adverse impacts on people and the environment. These companies will be expected to conduct scoping exercises to identify risks in their value chains and may request information from smaller business partners only where it cannot be obtained through other means.
Transition plans demonstrating alignment with the shift to a sustainable economy will no longer be mandatory. Companies found to be in breach of the rules could face national-level penalties of up to 3% of their global net turnover. The due diligence requirements will apply from 26 July 2029.
Commenting on the vote, rapporteur Jörgen Warborn of the European People’s Party said: “Parliament has listened to the concerns expressed by job creators across Europe. Backed by a broad majority, today’s vote delivers historic cost reductions while keeping Europe’s sustainability goals on track. This is an important first step in the ongoing efforts to simplify EU rules.”
The provisional agreement was approved by 428 votes in favour, 218 against and 17 abstentions. The text now requires formal approval by the Council before entering into force 20 days after publication in the EU’s Official Journal.
The revised rules form part of the European Commission’s Omnibus I simplification package, introduced in February 2025 to reduce administrative burdens and make sustainability compliance more manageable for businesses across the bloc.
