Sustainability

EU Council and EU Parliament reach an agreement to simplify sustainability reporting and due diligence requirements

14 Dec 20254 min read
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Contents

On 9 December 2025, the European Parliament (EP) and European Council (EC) reached a provisional agreement on the simplification of corporate sustainability reporting and due diligence requirements. This agreement includes a proposed Corporate Sustainability Reporting Directive (CSRD) employee threshold of 1,000 full-time equivalent (FTE) employees. In addition, this proposed agreement includes a review clause allowing for possible extension of the scope of both the CSRD and Corporate Sustainability Due Diligence Directive (CSDDD).

Background

Since CSRD initially came into force in the European Union (EU) on 1 January 2023, there have been increasing demands to streamline the requirements and reduce the reporting burden associated with sustainability reporting. The Omnibus package, initially released in February 2025, is intended to meet this demand for simplification. It contains proposed changes to both the CSRD and CSDDD and has undergone several rounds of negotiation within the EU legislative process to date.

In recent months, both the EP and EC have approved their individual negotiating positions. However, there were some differences between the two positions and for a final simplification agreement to be reached, those differences had to be reconciled. On 9 December 2025, the Legal Affairs Committee Members of the EP and EC reached a provisional agreement. The details of this agreement can be found here.


Summary of revised position and proposed agreement

The joint EP and EC position contains proposed changes to both the CSRD and CSDDD that are intended to reduce reporting burden, and are detailed below:

CSRD Changes

Joint position
Reduction in scope

This position proposes thresholds of 1,000 FTE employees and net turnover of €450 million for EU entities to be in scope for CSRD reporting, which will reduce the number of entities that will be required to report compared to existing thresholds.  

The position also proposes an EU net turnover threshold for non-EU entities of €450 million generated in the EU, with no associated employee threshold.  
Information request limitation
The position includes a limitation on the information that larger entities can request from their value chain partners that are out of scope of the CSRD. Reporting entities that are in scope of the CSRD will be prevented from requesting information beyond what is required by voluntary standards from out-of-scope entities in their value chain. 
Digital portal
The EC has agreed to establish a digital portal containing free templates, guidelines and information. 
Exemptions

The position includes: 

  • an exemption for financial holding entities, and
  • a transition exemption for wave 1 entities that fall out of scope for 2025 and 2026. 
Review clause
The position includes a review clause allowing for possible future scope extension of the CSRD. 

 

CSDDD Changes

Joint position
Reduction in scope
The position proposes CSDDD thresholds of 5,000 or more employees and over €1.5 billion in revenue, which will significantly reduce the number of entities in scope compared to current thresholds. 
Risk-based approach
The position introduces a risk-based approach, whereby entities are only required to ask for necessary information if there is a reasonable expectation of an adverse impact on their business partners’ activities, rather than systematically asking for the required information. 
Non EU-wide liability
The position indicates that obligations arising as a result of breaches of the CSDDD will be covered under national law, rather than at the EU level. A review clause was added on the need for a harmonised EU liability regime.  
Transition plan
The position removes the previous requirement to put into effect a transition plan for climate change mitigation to be compatible with the Paris Agreement. 
Penalties
The position includes a maximum penalty cap of 3% of an entity’s net worldwide turnover. 
Delay
The position postpones the CSDDD transposition deadline by another year to 26 July 2028 with compliance required by July 2029. 
Review clause
The position includes a review clause allowing for possible future scope extension of the CSDDD. 

 

Next steps

While this provisional agreement has been reached, it will need to undergo several legislative processes before the changes become final. These include votes by the EP Legal Affairs Committee, as well as a vote by the full EP, and endorsement and adoption by the EC. It is expected that these votes will occur throughout December and final endorsement and adoption will occur by early 2026. 

Current schedule for voting (proposed timeline and process):

  • 10 December 2025 - EC Coreper II vote
  • 11 December 2025 - EP Legal Affairs Committee vote
  • 15-16 December 2025 - Full EP plenary vote

 

Our thoughts

We are pleased to see a provisional agreement being reached between the EC and the EP. We hope that this provisional agreement can now be finalised through the legislative process as set out above. While upcoming changes may reduce mandatory European sustainability reporting requirements, this should not lead to a decline in ambition. Companies that embed sustainability into their core strategy consistently demonstrate that investing time and resources in robust reporting creates long-term value—for the business, its stakeholders, and society as a whole. 

We have published several other alerts related to the Omnibus package. For more information, click here: 

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