In a decisive move that dramatically narrows the reach of the EU’s sustainability reporting and due diligence regime, the European Parliament voted to significantly scale back the scope of its cornerstone corporate sustainability rules. In a 382 (in favor) to 249 (against) vote on November 13, lawmakers paved the way for sweeping amendments to the Corporate Sustainability Reporting Directive (“CSRD”) and the Corporate Sustainability Due Diligence Directive (“CSDDD”), marking a major retreat from the ambitious environmental and human rights framework adopted just last year.
Under the revised position, only the very largest companies – those with 5,000 employees and more than €1.5 billion in annual turnover – will be subject to the CSDDD’s due diligence obligations. This is a dramatic departure from the law’s original threshold of 1,000 employees and €450 million in turnover. Lawmakers also agreed to drastically limit which firms must disclose their environmental and social impacts under the CSRD, removing approximately 90 percent of companies initially included.
In a further blow to the Union’s climate ambitions, companies will no longer be required to prepare transition plans outlining how their business models align with the Paris Agreement.
> The CSRD requires companies to disclose detailed, standardized information on their environmental, social, and governance impacts, risks, and strategies. It dramatically expands the number of firms subject to mandatory sustainability reporting and aims to provide investors and stakeholders with reliable, comparable data on corporate sustainability performance.
> The CSDDD obligates large companies to identify, prevent, and address human rights abuses and environmental harms throughout their global supply chains. It establishes legally enforceable due diligence duties, requiring firms to assess risks such as forced labor, deforestation, and pollution and take action to mitigate or remedy those impacts.
The vote marks a major win for a newly emboldened conservative coalition, with the center-right EPP aligning with hard-right parties after their 2024 gains and arguing that the EU’s sustainability rules had become symbols of regulatory overreach and competitive strain. Progressive groups condemned the alliance as anti-democratic and anti-environment, warning that the amendments hollow out the EU’s strongest safeguards against supply-chain abuses, while far-right parties celebrated the shift as a long-awaited break from their political isolation and a victory for European industry.
Companies like TotalEnergies and ExxonMobil have similarly pushed for the rules to be weakened, citing compliance burdens, while supporters of the overhaul maintain that the changes are necessary to ease pressure on European firms facing high energy costs and fierce global competition, with EPP negotiator Jörgen Warborn arguing the amendments will cut costs and give businesses greater clarity.
THE NEXT STEPS: The next steps depend on interinstitutional negotiations, as Parliament’s position now diverges sharply from that of the EU Council. Trilogue talks are expected to begin in the coming weeks, with the goal of finalizing revisions to the CSRD and CSDDD by year’s end. The Council’s preference for a more moderate approach and the Commission’s narrower Omnibus proposal suggest difficult talks ahead. Member states must ultimately approve a final text, meaning Parliament’s broad rollbacks may face pushback.
The outcome will determine how far Europe’s sustainability framework is reshaped.
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