Smaller Company Relief: EU Council raises thresholds, cutting sustainability reporting burdens for up to 80% of firms.
Due Diligence Scaled Back: CSDDD scope limited to companies with 5,000+ employees and €1.5B+ turnover, shifting to a risk-based approach.
Transition Plan Delayed: Obligation for climate transition plans postponed by two years, with narrowed requirements.
The EU Council has adopted a sweeping negotiating position that significantly scales back corporate sustainability reporting and due diligence rules, exceeding the deregulatory ambitions of the European Commission’s original Omnibus proposal.
The Council’s position centers on cutting compliance burdens and protecting smaller companies by revising the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The changes would reduce reporting obligations to only the largest companies operating in the EU.
“Today 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,” said Adam Szłapka, Minister for the European Union of Poland.
CSRD Scope Cut Further
The Commission’s February proposal had already raised the CSRD threshold from 250 to 1,000 employees. The Council went further, adding a €450 million net turnover requirement, removing an estimated 80% of firms from the reporting scope.
A review clause was also introduced, mandating a future assessment on whether sustainability disclosures help mobilize private investment and boost competitiveness. The clause also opens the door to a “simplified reporting regime” for any potential expansion of scope.
CSDDD Significantly Narrowed
While the Commission did not revise the CSDDD scope, the Council established strict thresholds: only companies with 5,000 employees and €1.5 billion in revenue will be subject to due diligence rules. The rationale: these firms “can have the biggest influence on their value chain and are best equipped to absorb the costs and burdens of due diligence processes,” according to the Council’s statement.
The Council also redefined the approach from an entity-based to a risk-based model. This reduces the requirement for full supply chain mapping to a scoping exercise based on reasonably available information, with due diligence largely confined to direct (tier 1) partners—unless clear evidence points to deeper supply chain risks.
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Climate Plan, Liability, and Timing Adjustments
The obligation to adopt climate transition plans was softened: companies must now outline implementing actions rather than prove execution. The deadline to comply was delayed by two years, and supervisory authorities are empowered to guide companies on plan design and implementation.
The Council also confirmed support for the Commission’s proposal to remove the EU-harmonized civil liability regime, maintaining member state discretion.
Finally, the transposition deadline for the CSDDD was extended by one year, now set for July 26, 2028.
The Council’s position now forms the basis for upcoming negotiations with the European Parliament, which is also considering scaled-back revisions. If passed, these measures would mark a decisive shift in the EU’s sustainability regulatory landscape, with a focus on easing pressure on smaller businesses while preserving core ESG objectives for larger corporations.
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