EU negotiators have reached a provisional agreement to simplify corporate sustainability reporting and due diligence requirements, aiming to reduce administrative burdens and improve the bloc’s competitiveness. The deal revises key elements of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D), easing obligations particularly for mid-sized and smaller companies.
Changes to the Corporate Sustainability Reporting Directive (CSRD)
The provisional agreement introduces several adjustments to reduce compliance pressures:
- Higher thresholds: The employee threshold rises to 1,000, with a new net turnover threshold of over €450 million. Listed SMEs are removed from the directive’s scope.
- Exemptions: Financial holding companies will be exempt from CSRD requirements.
- Transition period: Companies that began reporting for the 2024 financial year but fall out of scope under the new thresholds will receive a temporary exemption for 2025 and 2026.
- Review clause: Lawmakers have added a provision to reassess whether the scope of both CSRD and CS3D should be expanded in future.
Changes to the Corporate Sustainability Due Diligence Directive (CS3D)
Although CS3D was not part of the Commission’s initial simplification package, negotiators agreed to narrow its scope:
- Higher thresholds: The directive will apply to companies with at least 5,000 employees and €1.5 billion in net turnover.
- Due diligence focus: Companies will no longer be required to perform detailed mapping of entire value chains. Instead, they must carry out a general scoping exercise and focus on areas where adverse impacts are most likely to occur.
- Flexibility: When adverse impacts are equally likely across multiple areas, firms may prioritise those involving direct business partners.
- Transition plans: The obligation to adopt climate transition plans has been removed.
- Liability rules: Plans for an EU-wide harmonised civil liability regime have been dropped, although a review clause has been added.
- Penalties and deadlines: Penalties will be capped at 3% of global net turnover. The transposition deadline is postponed to 26 July 2028, with companies required to comply from July 2029.
The provisional agreement now awaits formal endorsement by both the Council and the European Parliament before it can be adopted.
Background
The simplification push follows repeated calls from EU leaders to cut administrative complexity and support European competitiveness, including recommendations from the Enrico Letta and Mario Draghi reports. In response, the Commission issued two “Omnibus” simplification packages in February 2025. EU leaders later urged legislators to finalise these reforms as a priority in 2025.
A related “Stop-the-clock” mechanism—adopted in April 2025—has already delayed the application of CSRD requirements for certain large companies and SMEs, as well as the initial implementation phase of CS3D.
The latest provisional deal forms part of broader efforts to create a more predictable and manageable regulatory environment for businesses across the EU.
