The European Parliament's Committee on Legal Affairs (JURI) voted in favour of approving the significant changes in the EU Corporate Sustainability Reporting Directive (CSRD) and the Due Diligence Directive Corporate Sustainability Reporting Directive (CSDDD). These changes are part of the Omnibus I simplification package published by the European Commission on 26 February 2025 to streamline reporting requirements.

The move comes after growing concerns that sustainability reporting requirements are putting European companies at a competitive disadvantage. The vote, in which JURI approved its position by 17 votes in favour, represents a significant shift from the ambitious scope originally planned for the directives.

Dramatic reduction in the number of companies affected

The most significant change is dramatic decrease in the number of companies, which are subject to mandatory sustainability commitments.

Changes in CSRD (Corporate Sustainability Reporting Directive):

MEPs want to narrow the scope of the CSRD to only include companies that meet both of the following criteria:

1. More than 1,000 employees.
2. Net annual turnover over 450 million euros.

The Commission estimates that its proposals will reduce the number of companies covered by the CSRD by 80%. All three institutions (Parliament, Council, Commission) now agree that companies with fewer than 1,000 employees should be exempted from the CSRD.

Changes in the Corporate Sustainability Due Diligence Directive (CSDDD):

In the case of due diligence obligations, the threshold would be increased to companies with:

1. More than 5,000 employees.
2. Net annual turnover over EUR 1.5 billion.

These new thresholds mean that mandatory due diligence will be faced by only the largest corporationsThe Council's position may represent a 70% reduction in the number of companies covered by the CSDDD.

Impact on companies outside the EU

The changes also affect foreign companies (outside the EU).

• For CSRD: The EU net turnover threshold is increased to EUR 450 millionThe net turnover threshold for an EU branch is increased to EUR 50 million.
• For CSDDD: The rules would apply to foreign companies with a net turnover in the EU of over €1.5 billion.

Companies from third countries that will no longer be subject to mandatory requirements may report voluntarily.

Changing approach to supply chains

The reforms fundamentally change the way companies must approach their supply chains, moving from comprehensive mapping to targeted risk-based assessment.

Risk-based approach: MEPs propose that companies should only request necessary information from business partners if there is a possibility of adverse impact. The JURI committee compromise text proposes that companies should first carry out a "scoping exercise" based on information that is already reasonably available. Only then are they obliged to assess only the most likely and serious adverse impacts.

Indirect suppliers: The requirement to exercise due diligence should be limited to: direct (level 1) business partnersCompanies would only be required to screen indirect suppliers if they have "trustworthy information" (e.g. reports from NGOs, complaints from local communities or academic research) that indicate an adverse impact.

Protection of smaller companies: The Commission proposals introduce "value chain ceiling". It is proposed that companies within the scope of the regulation be prevented from requesting information from their smaller partners (those with fewer than 1,000 employees) that goes beyond voluntary reporting standards.

Timeline and next steps

Negotiations on the final legislative text are due to start on 24 October 2025, with trilogue negotiations (between Parliament, Council and Commission) scheduled for November and December 2025. It is expected that this process could be completed by the end of Q4 2025 or early Q1 2026.

Postponed implementation dates:

• CSRD: Member States must transpose the changes by 31 December 2025. Large EU companies face reporting requirements for financial years starting 1 January 2027 (with first reports due in 2028).
• CSDDD: The transposition deadline for Member States is postponed from 26 July 2026 to July 26, 2027The first phase of application for companies is postponed by one year to July 26, 2028.

The Omnibus reforms represent the most significant recalibration of EU sustainability policy since the launch of the European Green Deal. While the largest companies remain in scope, the introduction of risk-based due diligence should reduce the administrative burden. However, for smaller firms, which are now outside the mandatory scope, the question arises as to whether voluntary reporting will become a competitive necessity. JRi