EU Parliament backs scaled-back sustainability reporting rules

The European Parliament has approved a provisional agreement with European Union (EU) governments to revise sustainability reporting and corporate due diligence rules, significantly narrowing their scope to reduce compliance costs and boost EU competitiveness.

Under the new framework, only EU companies with more than 1,000 employees and annual net turnover above €450 million (~$527.14 million) will be required to undertake mandatory social and environmental reporting. The rules will also cover non-EU companies generating more than €450 million in EU turnover, as well as their subsidiaries and branches with over €200 million in EU turnover.

Reporting obligations will be substantially simplified, with sector-specific disclosures becoming voluntary. Lawmakers also ensured that large companies cannot transfer reporting responsibilities to smaller business partners. Firms with fewer than 1,000 employees will only be asked to provide information already included in voluntary standards. To support implementation, the European Commission will create a digital portal offering templates and guidance on EU and national reporting requirements.

Corporate due diligence obligations have also been scaled back. Only very large EU companies with more than 5,000 employees and annual net turnover exceeding €1.5 billion will need to assess and mitigate adverse human rights and environmental impacts across their value chains. The same threshold will apply to non-EU companies based on EU turnover. These companies may request information from smaller partners only when it cannot be obtained through other means.

Transition plans aligning business models with the shift to a sustainable economy will no longer be mandatory. Companies that fail to comply with the revised rules could face national-level penalties of up to 3 per cent of global net turnover. The due diligence directive will apply from July 26, 2029, the European Parliament said in a release.

“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,” said rapporteur of the legal affairs committee Jorgen Warborn (EPP, SE).

The agreement was adopted with 428 votes in favour, 218 against and 17 abstentions. It now requires formal approval by the Council and will enter into force twenty days after publication in the Official Journal. The reforms form part of the Commission’s Omnibus I simplification package unveiled in February 2025.

ALCHEMPro News Desk (HU)