Fewer Firms to Face EU Sustainability Reporting Under New Draft Rules

Key Takeaways

• Narrower Scope: Only companies with more than 1,000 employees and €450 million in annual turnover would be required to conduct sustainability reporting.
• Due Diligence Limits: Obligations would apply only to EU firms with over 5,000 employees and €1.5 billion in turnover, and to non-EU firms earning the same within the bloc.
• National Enforcement: Civil liability would remain at the national level, with fines capped at 5% of global turnover.
• Digital Support: The Commission will create a one-stop portal with free access to templates and guidance.

Deep Dive

The European Parliament’s Legal Affairs Committee has voted to ease compliance obligations under the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), backing proposals that would reduce the number of companies required to report and simplify due diligence requirements across the EU.

With 17 votes in favor, 6 against, and 2 abstentions, the committee adopted its position on amendments to the EU’s corporate sustainability and due diligence framework aimed at simplifying reporting and easing administrative burdens for businesses.

Under the proposal, only companies with more than 1,000 employees and a net annual turnover exceeding €450 million would be required to report on social and environmental issues. This threshold goes further than the European Commission’s original plan, which sought to remove around 80% of companies from reporting obligations. Companies falling outside the scope would be able to report voluntarily in line with Commission guidance, and large companies would not be allowed to request non-mandatory information from smaller partners. Sector-specific reporting would also become voluntary, with an emphasis on quantitative information to reduce costs and complexity.

The Commission would establish a new digital one-stop-shop to provide free access to templates, guidelines, and information related to EU reporting requirements. The platform would complement the European Single Access Point, offering centralized support for companies still covered by the rules.

For due diligence, the obligations would only apply to large EU companies with more than 5,000 employees and an annual turnover exceeding €1.5 billion, and to non-EU firms generating the same amount within the EU. These companies would be required to identify and mitigate human-rights and environmental risks using a risk-based approach, requesting information from business partners only where there is a credible prospect of adverse impacts.

Civil liability would remain at the national level rather than being introduced EU-wide, with penalties capped at 5% of a company’s global turnover. Member states and the Commission would be expected to issue guidance to ensure consistent enforcement. Companies would still need to prepare transition plans aligning their business strategies with the Paris Agreement and the broader goal of a sustainable economy.

Rapporteur Jörgen Warborn (EPP, Sweden) said the vote reflected Parliament’s commitment to clarity and competitiveness.

“Today’s vote confirms our support for simplification,” he said. “We are delivering predictability for European companies, with a report that cuts costs, strengthens competitiveness, and keeps Europe’s green transition on track.”

If approved by the full Parliament at its next plenary session, negotiations with EU governments and the Commission are expected to begin on October 24 to finalize the legislation.

The simplification proposal forms part of the European Commission’s “Omnibus I” package, presented in February 2025, which aims to streamline EU corporate reporting and due diligence requirements to reduce administrative burdens and boost competitiveness across the bloc.

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