The revamped rules will apply to fewer companies and reduce some obligations for firms thus strengthening EU competitiveness.
Easier sustainability reporting
Only EU companies employing on average over 1,000 employees and with a net annual turnover of over €450 million will have to carry out social and environmental reporting. The rules will also apply to non-EU companies with net turnover in the EU of over €450 million and to their subsidiaries and branches generating turnover higher than €200 million in the EU.
The reporting requirements will be significantly simplified, and sector-specific reporting will become voluntary. Co-legislators ensured that companies required to prepare sustainability reporting will not shift that responsibility to their smaller business partners. Firms with fewer than 1,000 employees will not have to provide information to their bigger business partners beyond what is included in the voluntary reporting standards. To facilitate compliance, the Commission will establish a digital portal with access to templates and guidelines on EU and national reporting requirements.
Due diligence obligations for very big corporations
Fewer companies will need to carry out due diligence on reducing their negative impact on people and the planet. Under the revised rules, this will only be required from large EU corporations with more than 5,000 employees and a net annual turnover of over €1.5 billion and for non-EU companies above the same turnover threshold in the EU. They will have to carry out scoping exercises to identify risks in their chain of activities and they should only ask for information from business partners with fewer than 5,000 employees when the information for in-depth assessment cannot be obtained another way.
Transition plans ensuring a company’s business model is compatible with the shift to a sustainable economy will no longer be required. Businesses will be liable at the national level for failures to apply the rules correctly and could face fines of up to 3% of the firm’s net worldwide turnover.
The due diligence directive will only apply from 26 July 2029 for all businesses within its scope.
Quote
Rapporteur of the Legal Affairs Committee Jörgen Warborn (EPP, SE) said: ”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.”
Next steps
The text was adopted with 428 votes in favour, 218 against and 17 abstentions. The final text will have to be formally approved by Council, too. The directive will enter into force twenty days after its publication in the Official Journal.
Background
The updated sustainability rules are part of the Commission’s Omnibus I simplification package. It was presented in February 2025 with the aim to cut red tape and make compliance with sustainability rules easier for businesses thus boosting EU competitiveness. Following the delayed application of the sustainability reporting and due diligence obligations, this proposal seeks to simplify them and reduce the administrative burden for companies.
A press conference with rapporteur Jörgen Warborn will take place on Tuesday 16 December at 15.00. You can follow it live.
Discussion about this post