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EU Council signs off on reporting and due diligence requirements agreement
SustainabilityEU Council approves final agreement on CSRD and CSDDD simplification.
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
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Joint position
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Reduction in scope
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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. |
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Information request limitation
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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.
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Digital portal
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The EC has agreed to establish a digital portal containing free templates, guidelines and information.
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Exemptions
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The position includes:
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Review clause
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The position includes a review clause allowing for possible future scope extension of the CSRD.
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CSDDD Changes
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Joint position
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Reduction in scope
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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.
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Risk-based approach
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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.
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Non EU-wide liability
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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.
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Transition plan
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The position removes the previous requirement to put into effect a transition plan for climate change mitigation to be compatible with the Paris Agreement.
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Penalties
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The position includes a maximum penalty cap of 3% of an entity’s net worldwide turnover.
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Delay
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The position postpones the CSDDD transposition deadline by another year to 26 July 2028 with compliance required by July 2029.
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Review clause
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The position includes a review clause allowing for possible future scope extension of the CSDDD.
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Next steps
As of 16 December 2025, the provisional agreement has undergone several votes within the EP, including Coreper II, the Legal Affairs Committee, and the full EP plenary vote, and has been approved. In order to be finalised, EC formal endorsement and adoption must be completed. This is expected to occur in early 2026.
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:
- Sustainability Alert 2025-19: EFRAG provides its technical advice on the simplified ESRS to the Commission
- Sustainability Alert 2025-18: Further updates on EU Parliament negotiations regarding reduced sustainability reporting and diligence requirements
- Sustainability Alert 2025-17: EU Parliament continues negotiations on reduced sustainability reporting requirements
- Sustainability Alert 2025-15: EFRAG releases revised ESRS Exposure Drafts
- Sustainability Alert 2025-14: European Commission adopts ‘quick fix’ amendments to ESRS for Wave 1 entities
- Sustainability Alert 2025-12: The European Commission adopts a new Delegated Act to Simplify EU Taxonomy reporting requirements
- Sustainability Alert 2025-08: Omnibus package stop-the-clock proposal adopted by European Parliament
- Sustainability Alert 2025-05: The Omnibus package – European Commission releases significant proposals to simplify EU.
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