Yesterday, 10 December 2025, the Council’s presidency and European Parliament’s negotiators reached a provisional agreement to simplify the EU’s sustainability reporting and due diligence requirements. The provisional agreement must be now endorsed by the Council and the European Parliament, before it is formally adopted by the two institutions. However, further changes are unlikely and the legislative changes should be fully agreed by 16 December.
As regards the Corporate Sustainability Reporting Directive (CSRD), the Commission proposed to increase the employee threshold to 1000 employees and to remove listed SMEs from the scope of the directive, meaning that entities with fewer than 1000 employees and listed SMEs would not need to provide sustainability reports. It is now agreed, in addition, that only entities with a turnover of over €450 million will have to do so. Finally, companies that had to start reporting from financial year 2024 (the so-called “wave one” companies) will be formally “out of scope” for 2025 and 2026. We note that some “wave one” companies have already reported.
As regards the Corporate Sustainability Due Diligence Directive (CS3D), the CS3D’s transposition deadline has been postponed by another year, to 26 July 2028. Companies will have to comply with the CS3D’s requirements by July 2029. It has been agreed that entities will only be in scope if they have more than 5,000 employees and €1.5 billion net turnover. In addition, (in a change to amendments proposed by the Commission which limited scope of the due diligence requirements to a company’s own operations, those of its subsidiaries, and those of its direct business partners), it has been agreed that companies can focus on the areas of their chains of activities where actual and potential adverse impacts are most likely to occur. Further, when a company has identified adverse impacts, they are given the ability to prioritise assessing adverse impacts which involve direct business partners. They are no longer required to carry out a comprehensive value chain mapping exercise but instead can conduct a more general scoping exercise. Companies will no longer be required to adopt a climate transition plan. The liability regime has also been watered down.