EU Council Backs Plan to Dial Down Sustainability Reporting Rules for Big Business

Key Takeaways

• CSRD Scope Cut Back: Only firms with 1,000+ employees and €450M turnover in scope; listed SMEs removed.
• CS3D Thresholds Raised: Applies only to firms with 5,000+ employees and €1.5B turnover.
• Risk-Based Due Diligence: Focuses on likely harm, using tier 1 supply chain data and reasonable info.
• Climate Plan Requirements Delayed: Companies now have two extra years to prepare.
• Transposition Deadline Shifted: CS3D deadline moves to July 2028, giving firms breathing room.

Deep Dive

In a move pitched as part simplification, part survival strategy, EU member states have agreed to rein in some of the most ambitious corporate sustainability rules on the books, at least for now.

Meeting in Brussels on June 24, the Council of the European Union adopted its negotiating position on the so-called Omnibus I package, a suite of legislative tweaks aimed at reducing red tape in sustainability reporting and due diligence. The goal? To help EU companies stay competitive in a landscape where the pressure to disclose everything, from carbon footprints to forced labor risks, is starting to feel like a full-time job.

“Today we delivered on our promise to simplify EU laws,” said Adam Szłapka, Poland’s Minister for the European Union. “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.”

Szłapka’s words reflect a broader political mood shift in Brussels: one where leaders are starting to ask whether Europe’s regulatory ambitions have outpaced what companies can realistically handle.

Less Is More? What the Council’s Mandate Says

The Council’s position includes a series of rollbacks and recalibrations to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D)—two laws that were, until recently, seen as pillars of the EU’s effort to make capitalism greener and more accountable.

Under the revised CSRD approach, the employee threshold for mandatory reporting would jump to 1,000, and listed SMEs would be taken out of scope entirely. On top of that, the Council added a new net turnover threshold of €450 million. The idea is to limit reporting requirements to the biggest players, the ones with the resources to actually produce meaningful disclosures.

On the CS3D, the Council went further still. Only companies with 5,000 employees and €1.5 billion in turnover would be subject to mandatory human rights and environmental due diligence. In short, if you're not one of Europe’s corporate giants, the directive probably won’t apply to you, at least not yet.

Instead of mapping every link in their global value chains, companies would only need to assess risks in areas where adverse impacts are most likely, and mostly stick to direct business partners. The familiar and burdensome “tier 2 and beyond” expectations? Not required, unless there's clear evidence of something going wrong further down the chain.

Climate Plans on Ice (For Now)

When it comes to climate transition plans, the Council is also hitting the brakes, slightly. The requirement for companies to implement such plans has been softened into an expectation that they simply outline them. The deadline for doing so has been pushed back by two years, and national authorities will be given an advisory (not policing) role in helping companies shape those plans.

The Council also endorsed postponing the CS3D’s transposition deadline by a full year, pushing it to July 26, 2028. That dovetails with April’s adoption of the “Stop-the-clock” mechanism, which delayed the rollout of CSRD reporting requirements for large companies not yet reporting, and for listed SMEs.

All of this fits neatly into the EU’s broader pledge to “simplify without retreating.” That promise, coined in the wake of the Letta and Draghi competitiveness reports, has become something of a mantra for leaders walking the tightrope between regulatory ambition and economic reality.

What happens next? The European Parliament still needs to hammer out its own position. Once that’s done, trilogue negotiations can begin in earnest. But whether Parliament will embrace the Council’s back-to-basics approach, or push to preserve more of the original vision, remains to be seen.

For now, businesses can exhale, at least a little. Brussels is signaling it’s ready to listen to their concerns, even if it’s not quite ready to throw out the ESG playbook altogether.

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