The EU’s CSRD and CSDDD Compliance Playbook Is Being Rewritten (Again)

European policy-makers are moving swiftly to scale back the scope and burden of corporate sustainability reporting. Specifically, in recent weeks, two parallel developments—one political, the other technical—have introduced further modifications to the European Union’s (EU) Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) frameworks. These developments signal that while the EU continues to focus on developing and implementing measures to facilitate long-term sustainable policies, it increasingly pivots toward reducing reporting and compliance burdens in order to foster economic competitiveness.

On the political front, the European Parliament’s rapporteur for the EU’s “Omnibus Simplification Package” (which we wrote about here) has published a draft report that includes sweeping proposed amendments to the EU’s CSRD and the CSDDD. Chiefly, the report proposes to align the scope for reporting under CSRD and CSDDD to those companies with 3,000 employees and €450m net turnover (i.e., revenue), significantly reducing the number of companies that would be subject to EU sustainability rules. In a statement accompanying the report, the EU’s rapporteur said “I’m entering this process with a clear ambition: to cut costs for businesses and go further than the Commission on simplification. Less red tape and fewer burdens for businesses. That’s how we strengthen Europe’s economy.”

In a parallel development, on June 23, the member states reached an agreement with respect to the Council’s negotiating positions on the proposed modifications. One critically important term included in the Council’s core negotiating framework, announced on June 23, is to delay due diligence obligations until July 2028. Adam Szłapka, Poland’s Minister for European Union Affairs, said “[t]oday we delivered on our promise to simplify EU laws. We are taking a decisive step towards our common goal to create a more favorable business environment to help our companies grow, innovate, and create quality jobs.” This agreement mandates the Council’s Presidency—currently Poland, followed by Denmark (July–December) and then Cyprus (January–June 2026)—to negotiate the final legislation in the so-called “trilogue,” which will then need to be adopted by both the European Parliament and the Council.

The co-legislators—the European Parliament and the European Council (which is made up of the EU member states)—are finalizing their positions and will then need to negotiate a final outcome. The current tenor of discussions suggests that policy-makers seem poised to further narrow applicable thresholds under CSRD and CSDDD, as well as relaxing core reporting obligations.

Relatedly, the European Financial Reporting Advisory Group (EFRAG) recently published a progress report covering its efforts to dramatically simplify the European Sustainability Reporting Standards (ESRS), which underpin the CSRD’s disclosure requirements. The progress report “provides detailed information about the development of EFRAG’s work plan, the simplification and burden reduction levers that are activated and the expected outcome as of today in terms of simplification.” It follows a public consultation initiated by EFRAG that concluded at the end of May 2025 as the EFRAG continues working toward a 50% reduction in mandatory data points, with a formal deadline for technical advice set for October 31, 2025.

Together, these initiatives would reshape sustainability reporting in Europe, raising key strategic and compliance questions for companies preparing for CSRD implementation and CSDDD compliance.

Comparing the Disclosure Reform Proposals

To help organizations track and evaluate these proposed changes, the table below summarizes the key elements of the European Commission’s (EC) earlier proposals, the European Parliament’s June 2025 draft and the Council’s latest position:

What’s Driving the Change?

The primary driver behind these reforms is a push to reduce regulatory costs for European businesses—especially amid rising concern that the EU’s sustainability rules may place companies at a competitive disadvantage relative to jurisdictions like the United States and China. A related driver is the internal EU commitment to reduce reporting requirements by at least 25% as agreed by member states in their November 2024 Budapest Declaration.

The EU rapporteur’s proposal frames the CSRD and CSDDD as overly complex and burdensome, particularly for mid-sized undertakings. By raising the applicability thresholds and loosening reporting requirements, the EU rapporteur’s proposed amendments are intended to limit reporting rules to only the largest firms.

EFRAG’s simplification initiative reflects a similar concern. After receiving strong feedback from companies, industry groups and member states, the EC directed EFRAG to cut the number of disclosures required in the ESRS, which currently contains nearly 1,200 data points, by at least half. EFRAG’s recently published progress report identifies “key levers of simplification” that it believes should result in significantly reduced compliance and reporting obligations. These include simplifying the double materiality assessment process, encouraging better readability and concision in sustainability statements, better alignment between “minimum disclosure requirements” and topical specifications, and enhancing interoperability.

What Happens Next?

The EU rapporteur’s draft will now form the basis for the European Parliament’s negotiations toward its official final position expected in October, followed by the so-called “trilogue” discussions among the Parliament, the Council and the EC, which is expected to result in a final policy package by the end of this year or early 2026. The Presidency, most likely Denmark, will negotiate on behalf of the Council. In addition to the Council agreed position points described above, it also wants the due diligence obligations to postpone application by one additional year, until July 2028. In parallel, EFRAG will continue to revise the ESRS framework, with its final recommendations due in the fall. The outcome of both efforts remains uncertain. While some member states and political parties favor deregulation, others—including Green and Social Democrat members of the European Parliament (MEPs)—have signaled strong opposition to what they view as a rollback of hard-won sustainability progress.

What Companies Should Do Now

Despite the prospect of reduced obligations, companies should continue preparing for CSRD and CSDDD implementation and compliance. The existing rules remain in effect, and reporting for large public-interest entities is already underway. Even if exemptions are ultimately expanded, many investors, stakeholders and global frameworks (e.g., ISSB and GRI) continue to expect robust sustainability disclosures.

In the near term, we recommend companies:

1. Evaluate Exposure Under Proposed Thresholds

Determine whether you would remain subject to (i.e., “in-scope”) CSRD and/or CSDDD under the proposed thresholds, as modified.

2. Continue CSRD Preparation

Existing implementation timelines have not yet changed, so companies are encouraged to continue preparing to satisfy applicable obligations..

3. Consider Strategic Voluntary Reporting

Even if exempted, voluntary sustainability disclosures can demonstrate leadership, attract capital and position companies for future regulatory or investor demands.

4. Stay Informed on Political Developments

Monitor political developments in the EU as negotiations progress. National governments may also seek to influence the final package.

Despite simplification efforts, the road ahead is expected to be difficult for businesses to navigate. Given the average lead time of 12-18 months of compliance preparations, many entities uncertain of being in or out of scope will struggle to predict where EU policy-makers will ultimately land. Real time access to reliable intelligence and expertise in relation to where policy-makers may land with respect to these evolving complexities will be critical for companies to timely comply with applicable obligations. If you would like to discuss how these developments could impact your organization, please contact our team.