The European Parliament and EU member states have reached a significant agreement to adjust the sustainability reporting regulations for businesses. This provisional deal pertains to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), as a result of trilogue discussions among the Parliament, member states, and the European Commission.
These discussions focused on standardizing and simplifying the sustainability reporting and due diligence obligations that businesses operating within the EU must adhere to.
Under the new parameters, only EU companies with over 1,000 employees and an annual net turnover exceeding €450m ($524m) will face social and environmental reporting obligations. For non-EU companies, the threshold for sustainability reporting is set at the same €450m annual net turnover generated within the EU.
Moreover, the revised rules will introduce more quantitative reporting requirements, while sector-specific disclosures will transition to a voluntary basis. Small companies with fewer than 1,000 employees will not need to provide additional information beyond what is outlined in voluntary standards and can refuse requests for further data.
The agreement also specifies that only large corporations, those with more than 5,000 employees and an annual net turnover exceeding €1.5bn, must implement due diligence measures aimed at minimizing adverse impacts on people and the environment. This stipulation will similarly apply to non-EU firms meeting the same revenue benchmark within Europe.
Firms that need to comply with these updated due diligence standards will be exempt from preparing business model transition plans consistent with the Paris Agreement. Accountability for non-compliance will reside at the national level, where fines could reach up to 3% of a company’s global net turnover, in line with guidance from both the European Commission and member states.
Additionally, the agreement incorporates a digital portal managed by the Commission, providing businesses access to templates and guidance on EU and national reporting requirements. These modifications aim to alleviate administrative burdens, especially for smaller entities, by concentrating obligations on larger companies with a potentially greater environmental impact.
“Today we delivered on our promise to remove burdens and rules and boost EU’s competitiveness. This is an important step towards our common goal to create a more favorable business environment to help our companies grow and innovate,” stated Marie Bjerre, Denmark’s Minister for European Affairs.
On 13 November, members of the European Parliament approved the revisions. The provisional agreement awaits formal approval from both the Parliament and the Council before it can be published in the Official Journal of the EU and take effect.
MEP Jörgen Warborn remarked, “We have secured a very good compromise. We are making the sustainability rules easier to comply with, delivering historic cost reductions for businesses and still delivering for European citizens. This is a win for competitiveness and a win for Europe.”
In a separate ruling last month, the European Ombudswoman determined that the European Commission had committed maladministration by bypassing crucial transparency and evidence-based processes when drafting legislative proposals relevant to corporate sustainability due diligence.
“While the Commission must be able to respond urgently to various situations, particularly in the current geopolitical context, it must also ensure that accountability and transparency remain integral to its legislative processes,” stated Teresa Anjinho.
She emphasized, “In future, a better balance needs to be struck between having an agile administration and guaranteeing minimum procedural standards for law-making. Certain principles of good law-making cannot be compromised, even for the sake of urgency.”
For businesses in the food and beverage industry, these developments indicate a shift toward simplified regulatory compliance and a focus on larger corporations, potentially altering the landscape of how sustainability is approached across the sector.
