Simplification: Council agrees position on sustainability reporting and due diligence requirements to boost EU competitiveness
Brussels, 24 June 2025 — In a significant move aimed at reducing regulatory burdens on European businesses, the Council of the European Union today reached an agreement on its negotiating mandate for proposed reforms to corporate sustainability reporting and due diligence requirements. The decision marks a key step in the EU’s broader effort to enhance competitiveness while maintaining environmental and social standards.
The agreement covers two key legislative proposals — the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D) — both part of the Commission’s “Omnibus I” package adopted earlier this year. These reforms are intended to streamline obligations for companies, particularly large enterprises, while shielding smaller firms from excessive compliance costs.
Poland’s Minister for European Union Affairs, Adam Szłapka, hailed the outcome as a victory for pragmatic regulation. “Today we delivered on our promise to simplify EU laws,” he said during a press briefing after the negotiations. “We are taking a decisive step towards our common goal to create a more favorable business environment to help our companies grow, innovate, and create quality jobs.”
Raising Thresholds to Reduce Burden
Under the revised CSRD framework agreed by the Council, the employee threshold for mandatory sustainability reporting will be raised from the current level to 1,000 employees , effectively exempting many mid-sized corporations. Additionally, listed SMEs will be excluded altogether, a move that has been widely welcomed by business associations across Europe.
To further narrow the scope, the Council introduced a net turnover threshold of €450 million , ensuring that only the largest companies remain subject to the directive’s full reporting obligations. A review clause was also included to assess whether future adjustments are needed to maintain transparency and availability of sustainability data.
Due Diligence: Focus Shifts to Risk-Based Approach
On the due diligence front, the Council significantly raised the eligibility thresholds under the CS3D. Companies must now have at least 5,000 employees and €1.5 billion in net turnover to fall within the directive’s scope — a substantial increase from the original proposal. This change reflects the Council’s view that only the largest firms possess the capacity and influence to effectively manage sustainability risks across their supply chains.
Moreover, the Council moved away from a rigid, entity-based approach to due diligence, adopting instead a risk-based model focused on areas where adverse impacts are most likely to occur. Under the new rules, companies will no longer be required to conduct exhaustive mapping of their entire value chain but will instead carry out a general scoping exercise centered on direct business partners (“tier 1”).
However, if objective and verifiable information suggests potential harm beyond tier 1, companies may still be required to extend their due diligence efforts accordingly. A review clause will reassess this provision after several years.
Climate Transition Plans Delayed
In a concession to industry concerns about implementation timelines, the Council decided to postpone by two years the obligation for companies to adopt climate transition plans. While these plans remain a requirement, companies will now have additional time to prepare and refine strategies aligned with EU climate goals.
Supervisory authorities will also gain the power to offer guidance on plan design and execution, a shift from the prescriptive approach initially proposed by the Commission.
Civil Liability and Transposition Timeline Adjustments
The Council maintained the Commission’s proposal to remove the harmonized EU civil liability regime for non-compliance with due diligence obligations. Member states will retain flexibility in designing national liability frameworks, provided they ensure enforceability when EU law applies.
Additionally, the transposition deadline for the CS3D has been pushed back to 26 July 2028 , granting member states more time to adapt their legal systems to the new rules.
Broader Context: A Regulatory Reset for Competitiveness
The Council’s agreement follows months of intense debate among EU institutions and stakeholders over how best to balance sustainability goals with economic competitiveness. The reform effort is rooted in calls by European leaders last year — notably in the Budapest Declaration — for a “simplification revolution” to reduce red tape and administrative burdens, especially for small and medium-sized enterprises.
The Commission’s “Omnibus I” package, presented in February 2025, responded directly to those calls, with a focus on making EU legislation smarter and more adaptable to real-world business conditions. In March, EU leaders urged rapid progress on these reforms, emphasizing the need to finalize them by the end of 2025.
Earlier this month, the Council implemented a “Stop-the-clock” mechanism, delaying the application of certain CSRD and CS3D provisions to provide companies with breathing room.
Next Steps: Negotiations with the European Parliament
With the Council now having secured its negotiating position, attention turns to the European Parliament, which is expected to finalise its own stance in the coming weeks. Once both co-legislators are ready, formal trilogue negotiations can begin with the aim of reaching a provisional agreement before the end of the year.
Business groups and civil society organisations alike are closely monitoring the process, with some welcoming the relief measures as essential for competitiveness, while others warn against weakening accountability mechanisms for corporate sustainability practices.
As the EU seeks to reconcile green ambitions with economic resilience, today’s agreement represents a pivotal moment in shaping the bloc’s regulatory future.
Council agrees position on simplifying sustainability reporting and due diligence requirements to boost EU competitiveness.
