Trimming the Green Tape: The First EU Simplification Package Entered the Final Lap

Updated: October 27, 2025

Note: Subsequent to publishing our client alert, the European Parliament voted, on October 22, by a narrow margin against the compromise changes to the EU’s sustainability reporting and due diligence requirements that had been agreed in the lead Committee. The final stage of negotiations with the Council and the Commission will need to be postponed until the European Parliament finalizes its position and votes on the initiative. The vote is currently scheduled for November 13. Below, we explain the reasons for the shift and our expectations for the next steps.

On October 22, the Left, a far-left political grouping within the European Parliament, instigated a vote in the plenary on the compromise position agreed by the lead JURI Committee. Importantly, this motion received support from around 30 Social Democrat (S&D) members of the European Parliament and eventually meant that the compromise and the Parliament’s negotiating mandate were rejected by a narrow margin of 309 in favor, 318 against and 34 abstentions.

Supporters of the compromise, the center-right Christian Democrats (EPP) and the liberals (Renew), argued it would have reduced administrative burdens on smaller companies struggling to comply with complex ESG mandates. However, opponents on the far left and those split from the center-left social democrats (S&D) warned that rolling back disclosure requirements could undermine the EU’s climate goals and deprive investors of essential information to assess environmental and social risks. Pascal Canfin, a senior member of the Renew party, called the outcome a “mistake,” emphasizing that the compromise had been crafted by pro-European parties (i.e., the EPP, S&D and Renew) and cautioning that a more radical proposal – up to and including abolishing the CSDDD – could now gain traction.

Following the rejection and in line with Rule 72(3) of the Parliament’s Rules of Procedure, the draft will be open to amendments again, and the European Parliament will vote on these and the full position at the upcoming plenary session in Brussels on November 13. Negotiations with EU member states and the European Commission would follow, as co-legislators push to reach a final agreement by year-end.

The leading faction, consisting of the Christian Democrats and the EPP, once again faces a dilemma – either to negotiate, and potentially compromise, with the S&D to hold the centrist platform on which the European Parliament has been functioning and which elected the European Commission or to vote this legislation through with support from the far right of the political spectrum. Events since last week’s vote suggest that the former option, adoption on the basis of the centrist platform, is the scenario preferred by key players.

In the meantime, the Commission, as well as the EU member states, who have finalized their common position back in June, are urging the European Parliament to finalize its procedure in order to move closer to providing predictability to businesses.

While some uncertainty remains, we expect that the European Parliament’s position will not depart significantly from what we outlined in our original client alert below, prior to the vote. Current negotiations focus on two key aspects: i) whether a company should be able to be held liable for environmental damage, and ii) whether companies should be obliged to create climate transition plans and act upon them. We also believe that the aspect of extraterritoriality will be discussed in the final stage of the negotiations, the trilogue.

October 16, 2025

The first EU simplification omnibus, on sustainability reporting and due diligence, moves to the final stretch of negotiations with interests and emotions running high. The inter-institutional negotiations, known as the trilogue, are expected to start as soon as next week and are envisaged to conclude in December, allowing the revamped legislation to be finalized and voted on by the co-legislators in January 2026, followed by transposition into the national laws of individual EU member states.

Following months of discussions in the European Parliament (EP) over the proposed amendments to the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), the EP’s Legal Affairs Committee (JURI Committee) approved its position on a series of changes to sustainability reporting and due diligence requirements for companies. This vote is a result of heated disagreements within the center platform, followed by a compromise agreement, avoiding an alternative voting coalition with the far right of the EP’s political spectrum.

The EP’s lead negotiator, MEP Warborn, described the adopted position as one that “cuts costs, strengthens competitiveness, and keeps Europe’s green transition on track.”

This compromise position still significantly narrows the scope of sustainability reporting, but does so less aggressively than the June proposal (which we discussed here). Crucially, it brings the applicability thresholds mostly in line with those proposed by the European Council’s report: 1,000 employees and €450 million net turnover for the CSRD, and 5,000 employees and €1.5 billion net turnover for the CSDDD. Both thresholds are significantly higher than those proposed by the European Commission’s Omnibus package, but align with the position of the Council, the other co-legislator, composed of EU member state governments.

Proposed Changes at a Glance

The draft rules would significantly simplify EU sustainability and due diligence reporting obligations for both EU and non-EU companies. The legislation is being fast-tracked, and a final version is likely to narrow the scope of CSRD and CSDDD, eliminate key obligations for companies and their suppliers, and ease penalties for non-compliance.

• Scope Thresholds: As mentioned above, under CSRD, only companies with at least 1,000 employees and €450 million in net annual EU turnover would be in scope; under CSDDD, the thresholds rise to 5,000 employees and €1.5 billion. These thresholds are expected to survive subsequent negotiations.
• Climate Transition Plans: Companies would still need to prepare climate transition plans but would no longer be required to act on them. Policymakers may push to eliminate the planning requirement altogether, though this could face resistance from left-leaning factions.
• Civil Liability: Civil liability for non-compliance would not be harmonized across member states, meaning enforcement mechanisms will remain decentralized. This change is expected to survive subsequent negotiations.
• Due Diligence Obligations: Adopting a risk-based approach, companies would only need to conduct due diligence on suppliers when they have plausible information indicating risk. This provision remains subject to negotiation, as the range from a focus on tier-1 suppliers to an exclusive focus on risk illustrates that this may be one of the more difficult points for resolution between the Commission, Council, and Parliament.
• Penalty Structure: Companies would be subject to a maximum penalty of 5% of global turnover for non-compliance, replacing the previous minimum penalty approach.
• Extraterritoriality: Neither the Parliament nor the Council has addressed whether companies must report and conduct due diligence on their activities outside the EU. If this issue surfaces during subsequent negotiations, we expect pushback from left-leaning lawmakers and EU citizens.

We expect the trilogue negotiations to be relatively straightforward. However, the negotiators and their respective bodies will need to resolve key issues, namely the depth of due diligence, the climate transition plans, and extraterritoriality.

Comparing Proposals

What Companies Should Do Now

Companies should continue preparing for CSRD and CSDDD compliance while monitoring legislative developments. Recommended next steps include:

• Conduct a scoping exercise of any EU companies in your group and determine whether this could trigger any group-wide reporting under the newly proposed thresholds.
• Continue preparing climate transition plans.
• Identify information indicating whether any tier 1 suppliers present a plausible risk.
• Monitor and inform the trilogue negotiations with a view to a positive outcome. 

Subscribe to Akin’s Speaking Sustainability blog for ongoing analysis of legal and regulatory developments in the sustainability space, and please reach out to the team for any further information or assistance in scoping exercises.