Summary: Simplification of EU Sustainability Reporting

On 16 December, the European Parliament formally approved an agreement to simplify the sustainability reporting requirements of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) (the New Legislation). This will provide clarity to businesses that have grappled with unclear reporting guidelines over months of negotiations, delays and announcements of differing proposed amendments to the regime.¹ The New Legislation largely follows the Omnibus I proposals with a few key changes; below we set out a comparison of the different regimes. In significantly narrowing the scope of reporting requirements, the New Legislation will provide welcome relief to those concerned about the administratively burdensome reporting requirements of the current regime. That said, sustainability disclosure and responsible business conduct remain core pillars of the European Green Deal and the package reflects a significant adjustment in implementation rather than a wholesale retreat from the EU’s sustainability-related objectives.

Why Are Changes Being Made Now?

European Union (EU) policymakers have pursued simplification in response to mounting concerns that the scale and complexity of sustainability reporting were undermining competitiveness. Following sustained pressure from industry and governments, the Commission proposed the Omnibus I package in February 2025 to streamline existing laws, with President von der Leyen emphasising the need to “make business easy inside Europe” without abandoning the Green Deal’s objectives.

Key Changes Under the New Legislation

The New Legislation introduces sweeping changes to both the CSRD and CSDDD, primarily by narrowing their scope and simplifying obligations. Some of the most significant changes are compared in a table below and summarised here:

CSRD

1. Narrower Scope of CSRD Reporting - Sustainability reporting requirements will now apply only to larger companies, with the number of in-scope entities reduced by approximately 90%. For EU undertakings, scope is limited to entities which, on an individual or group basis, have more than 1,000 employees on average during the financial year (up from 250) and net annual turnover exceeding €450 million. Listed Small and Midsize Enterprises (SME) and financial holding companies (pure holding undertakings) are entirely removed from the scope of the CSRD. For non-EU companies, reporting applies to non-EU ultimate parent undertakings with more than €450 million net turnover generated in the EU for each of the last two consecutive financial years, where they also have an EU subsidiary or EU branch generating more than €200 million in the preceding financial year.
2. Relief for “Wave 1” Reporters - For companies that had already begun reporting under CSRD in 2024 (so-called “Wave 1” companies), the “quick fix” amendment adopted by the European Commission in July 2025 still applies. This provides a transitional exemption relieving companies from reporting during 2025 and 2026 if they now fall below the new scoping thresholds.
3. Limiting Demands on Small Partners – The changes introduce provisions aimed at protecting smaller businesses within large companies’ value chains from overburdensome information requests. Companies with fewer than 1,000 employees can now refuse to provide data beyond what is in the voluntary SME sustainability standards. In practice, this means if a large firm asks a small supplier for extensive sustainability data, the small company can decline anything not covered by the simplified SME reporting framework.

CSDDD

1. Higher Scope Threshold - The CSDDD now will apply solely to very large corporations. The agreement raises the scoping threshold for non-EU companies to €1.5 billion in net turnover with the EU. For EU companies, they must have over 5,000 employees and €1.5 billion global net turnover.
2. Risk-Based and Proportionate Due Diligence - The nature of the due diligence process is being overhauled to be more risk-focused and pragmatic. The new regime is narrower: Companies should focus on the areas of their supply chain where the most severe or likely adverse impacts could occur. Businesses can prioritize effort on their high-risk supply chain segments rather exhaustively mapping every relationship.
3. No Climate Transition Plan Requirement - One of the CSDDD’s more ambitious proposed obligations, that companies must adopt a plan to align their business with the Paris Agreement (presenting a detailed strategy for climate change mitigation), has been removed. The New Legislation does not require entities to disclose any form of transition plan.
4. Removal of EU-Wide Civil Liability Regime - The final agreement removes the controversial provision that would have created a harmonized EU civil liability for companies’ failures to comply with their due diligence obligations resulting in harm. The removal of the provision means that liability for due diligence failures will remain governed by national laws and that there will be no unified EU liability standard. Nevertheless, a review clause was added: the Commission will need to revisit in the future whether an EU harmonized liability regime is needed.
5. Capped and Harmonised Penalties - The New Legislation sets out a platform for a detailed penalties regime. For now, the Commission will collaborate with EU member states to develop further guidelines. At present, the maximum penalty is capped at 3% of an entity’s global annual turnover.

These key changes­ - fewer companies in scope, simpler requirements and more time - represent a substantial streamlining of the EU’s sustainability reporting regime. As the European Parliament’s lead negotiator, Jörgen Warborn (EPP), observed, the agreement “[delivers] historic cost reductions” for industry, with the Commission estimating administrative savings of around €4.5 billion across the EU. Warborn further emphasised that the final deal went “beyond the Commission’s proposal” in cutting red tape. The Danish Presidency of the EU Council, which brokered the agreement, likewise welcomed the outcome as fulfilling a commitment to “remove burdens and […] boost the EU’s competitiveness”.

European Sustainability Reporting Standards (ESRS)

As part of the simplification agenda, the underlying reporting framework itself, the European Sustainability Reporting Standards (ESRS), is being streamlined in parallel. In December 2025, the European Financial Reporting Advisory Group (EFRAG) delivered a draft revised ESRS aimed at simplifying double materiality assessments, reducing reporting metrics and aligning the ESRS more closely with existing financial reporting standards. The revisions reduce mandatory datapoints by around 60%, with the removal of voluntary disclosures resulting in an overall reduction of more than 70%. Substantively, the draft introduces a more pragmatic approach to double materiality, including an optional top-down assessment starting from the company’s business model, a streamlined topic list, simplified treatment of remediation, mitigation and prevention, updated definitions and clarification that a full assessment is not required annually absent material changes.

The amendments also introduce greater proportionality and flexibility, allowing the use of estimates in value-chain reporting where direct data is unavailable, limiting disclosures to information that is reasonable and supportable without undue cost or effort and rationalising the Minimum Disclosure Requirements (now General Disclosure Requirements) by reducing overlap with topical standards and removing the need to justify the absence of policies, actions or targets. Finally, additional flexibility is introduced around report structure, including the use of executive summaries and appendices (for example, for EU Taxonomy disclosures), with an overall shift towards more material, quantitative and comparable disclosures and away from highly prescriptive sector-specific reporting.

Next Steps

The full European Parliament has endorsed the plan, and the EU Council have undertaken to adopt Parliament’s position, to make a set of amendments to the CSRD and CSDDD. A legal instrument will still need to be published to officially make the agreed amendments to the existing legislation. The changes will then take immediate effect at the EU level and Member State’s will have a deadline to transpose them into national law.

The CSRD timetable remains unchanged following the “stop-the-clock” amendment:

• EU companies and groups will begin reporting for financial years starting on or after 1 January 2027.
• Non-EU ultimate parent companies beginning a year later, for financial years starting on or after 1 January 2028.

By contrast, the CSDDD has been pushed back further, with application deferred to 26 July 2029 and its reporting duties applying to financial years commencing on or after 1 January 2030.

What Should Companies Do Now?

To prepare companies should conduct a scoping exercise of any EU companies, or significant EU operations, to determine whether any entities come under the scope of the New Legislation.

• In Scope Companies should develop sustainability reporting processes and internal controls to meet the ESRS/CSRD obligations by 2027 and build robust supply chain due diligence to comply with the CSDDD in 2029.
• Out of Scope Companies ought to consider voluntary reporting or preparatory measures as investors and stakeholders may continue to demand sustainability transparency and, importantly, the review scheduled to occur in 2029 may also lead to further adjustments to the relevant scoping thresholds.

Conclusion

In essence, the New Legislation provides a pause, but not a permanent retreat, from the EU’s sustainability ambitions. The European Green Deal remains the guiding framework, and corporate transparency will continue to be a cornerstone of the EU’s sustainability reporting policy. Companies that use this window to embed sustainability into their core strategy, operations and disclosure processes, will be better positioned for the next reporting phase if requirements tighten and stakeholder expectations rise.

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Table: comparing existing legislation, various amendment proposals and the New Legislation

1 See our earlier post here which considered the negotiations surrounding the Omnibus proposals.