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EU Parliament Advances EU Sustainability Reporting Reform

We are reporting on a significant regulatory development shaping how sustainability obligations apply across the European Union. Lawmakers in the European Parliament have approved a provisional Omnibus agreement that substantially reduces sustainability reporting and due diligence requirements for companies operating within the bloc. The agreement passed with 428 votes in favour, 218 against, and 17 abstentions, marking a decisive step in the EU sustainability reporting reform process.

This parliamentary approval represents one of the final stages before the Omnibus I package becomes law. The package, introduced by the European Commission in February, was designed to simplify compliance across sustainability-focused regulations, while maintaining alignment with the EU’s broader environmental and social objectives. The agreement must still receive formal approval from the EU Council, after which it will enter into force.

From our viewpoint, this vote reflects how EU institutions are recalibrating sustainability frameworks in response to implementation challenges raised by businesses across Europe, while preserving the core intent of EU sustainability reporting reform.

Scope Changes Under CSRD and CSDDD

The Omnibus agreement directly amends two cornerstone regulations: the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). Initially, the Commission proposed narrowing CSRD coverage by raising the employee threshold from 250 to 1,000 employees, which would have reduced the number of covered companies by around 80%.

However, negotiations between the European Parliament and EU member states went further. While retaining the 1,000-employee threshold, co-legislators introduced an additional revenue criterion. Companies with less than €450 million in annual revenues will now fall outside the scope of CSRD, effectively excluding an estimated 90% of companies from mandatory sustainability reporting. This adjustment significantly reshapes the reach of EU sustainability reporting reform.

CSDDD Thresholds and Review Clauses

Changes to the CSDDD are even more pronounced. The agreement raises the applicability threshold to companies with at least 5,000 employees and €1.5 billion in annual revenues. As a result, the vast majority of businesses will no longer fall under mandatory sustainability due diligence obligations.

Importantly, the agreement introduces review clauses for both CSRD and CSDDD. These provisions allow the European Commission and co-legislators to reassess whether the scope of the regulations should be expanded in the future, keeping EU sustainability reporting reform adaptable over time.

Adjustments to Due Diligence and Liability Provisions

Beyond scope reductions, the agreement introduces several substantive regulatory changes. One notable adjustment is the removal of the obligation for companies under CSDDD to prepare climate transition plans. Additionally, the EU-wide civil liability regime originally embedded in the directive has been eliminated.

Penalties under the due diligence framework have also been revised. The agreement caps potential fines at a maximum of 3% of global revenues, lowering the financial exposure for companies that remain within scope. These changes collectively redefine enforcement expectations under EU sustainability reporting reform, while maintaining a common baseline across the European Union.

Supply Chain Reporting and SME Protections

The agreement also retains measures aimed at protecting smaller companies within supply chains. Firms with fewer than 1,000 employees may refuse to provide sustainability information beyond what is specified in the voluntary sustainability reporting standard for SMEs (VSME). Moreover, companies subject to CSDDD are directed to rely primarily on reasonably available information, rather than systematically requesting detailed data from smaller value chain partners.

This approach reflects continued efforts by EU institutions to balance transparency objectives with proportionality, a central theme throughout the EU sustainability reporting reform process.

Parliamentary Perspective Following the Vote

Following the vote, Parliament’s Rapporteur Jörgen Warborn stated:

“Parliament has listened to the concerns expressed by job creators across Europe. Backed by a broad majority, today’s vote delivers historic cost reductions while keeping Europe’s sustainability goals on track. This is an important first step in the ongoing efforts to simplify EU rules.”

As we observe next steps, attention now turns to approval by the EU Council, which will determine the timeline for implementation. Until then, the Omnibus agreement stands as a defining milestone in the ongoing evolution of EU sustainability reporting reform across the European Union.