In a major shift, the EU Council has adopted a deregulatory stance on corporate sustainability rules, drastically cutting ESG reporting and carbon neutral strategy obligations for smaller businesses. The revised position significantly alters the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), reducing compliance burdens for nearly 80% of firms operating in the EU. 

“Today we delivered on our promise to simplify EU laws,” said Adam Szłapka, Poland’s Minister for the EU. “We are creating a more favorable business environment to help companies grow, innovate, and create jobs.” 

Under the Council’s proposal, the CSRD reporting threshold increases from 250 to 1,000 employees, with an added €450 million turnover requirement. This move excludes most small and medium-sized businesses from mandatory ESG reporting, focusing disclosures on larger corporations with the highest environmental impact. 

The CSDDD has also been scaled back dramatically. Only companies with more than 5,000 employees and €1.5 billion in turnover would now face due diligence obligations related to environmental and human rights risks. The Council emphasizes a risk-based approach, limiting supply chain audits primarily to direct (tier 1) partners unless significant risks are identified deeper in the supply chain. 

Additionally, the climate transition plan mandate has been softened. Companies must now present intended actions but aren’t required to demonstrate full implementation immediately. The deadline for compliance has also been delayed by two years, with full transposition of CSDDD now pushed to July 2028. 

While these changes reduce the administrative burden on smaller companies, core ESG and carbon neutral strategy goals for large firms remain intact. Upcoming negotiations with the European Parliament will determine whether this revised regulatory approach becomes law, potentially reshaping the EU’s sustainability landscape. 

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https://esgnews.com/eu-council-pushes-major-cutbacks-to-sustainability-reporting-and-due-diligence-rules/