The EU has reached a provisional agreement to scale back two of its major sustainability laws: the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD, CS3D).
The deal – agreed by the European Commission, Council and Parliament – still needs final approval, but it marks a significant shift towards lighter reporting rules for businesses.
This update follows earlier delays to both directives under April’s “Stop the Clock” decision, which paused their rollout to allow time for reconsideration.
What has been agreed?
A narrower scope for CSRD
The CSRD currently requires large companies to report in detail on their environmental, social and governance (ESG) impacts. Under the new agreement, fewer businesses will fall into scope and reporting for EU companies will be required from FY 2027, while non-EU companies is from FY 2028.
Key changes include:
- Higher thresholds: CSRD reporting will only apply to EU companies with more than 1,000 employees and over €450 million in annual turnover. Non-EU companies delivering more than €450 million in turnover within the EU will also be in scope.
- Listed SMEs removed: Listed small and medium-sized enterprises, along with financial holding companies, will no longer be required to report under CSRD.
- Temporary exemption for early reporters: Some “wave one” companies are already reporting for the 2024 financial year. If they no longer meet the new thresholds, they can pause reporting for 2025 and 2026 while the new Directive is implemented.
- Simplified reporting: Companies that remain in scope will see a lighter burden. Sector-specific standards will become voluntary, and smaller out-of-scope companies will be able to refuse requests for additional sustainability data.
- New digital support tools: The European Commission will develop a digital portal offering templates and guidance to help companies navigate EU and national reporting expectations.
CSDDD also scaled back
The CSDDD, which requires companies to identify and address risks to people and the environment, will also apply to far fewer companies.
Updated thresholds include:
- Only very large companies in scope: EU companies with more than 5,000 employees and over €1.5 billion turnover, and non-EU companies generating €1.5 billion in EU turnover, will need to comply.
- No transition plan requirement: Companies will no longer need to produce a transition plan aligned with the Paris Agreement.
- Risk-based approach encouraged: In-scope companies should focus on highest-risk areas and avoid demanding unnecessary information from smaller businesses.
- Sanctions remain, but no EU-wide liability regime: Fines of up to 3% of global turnover remain on the table for non-compliance. However, Member States will create their own national liability rules instead of following a harmonised EU approach.
- New deadlines: The CSRD transposition deadline will move to 26 July 2028, with companies expected to comply by July 2029.
What happens next?
The provisional deal will now go to the European Parliament and Council for formal approval, which is expected to be confirmed before Christmas.
Once adopted, Member States will begin the process of updating their national laws to reflect the revised requirements.
We’re keeping an eye on changes to CSRD / CSDDD and will update the Energy Advice Hub as they happen. In the meantime, if you’re in scope of EU sustainability regulations and would like advice, get in touch with Sustainable Energy First.
