The European Union (EU) is changing its sustainability rules concerning corporate sustainability reporting and due diligence obligations. These changes are designed to make things simpler and easier for companies, especially smaller ones. Many businesses found the previous rules too difficult or costly. The new proposals mainly focus on large companies with more than 1,000 employees. They also give companies more time and flexibility to follow the rules.
CSRD Scope Slashed
A new proposal from 16 April 2025 suggests changing the rules so that only large companies need to report on sustainability. These companies must have more than 1,000 employees on average during the year and either make over EUR 50 million in sales or hold assets worth more than EUR 25 million. This is a major change from the current rules, which also include smaller listed companies (except very small ones). The goal is to reduce the reporting burden and create a more balanced approach. As a result, many small and medium-sized listed companies, as well as some banks and insurance firms, would no longer need to report under these rules.
EU Taxonomy Reporting
The new proposal also changes when non-EU companies must report sustainability information. These companies only need to report if they earn more than EUR 450 million in the EU for two consecutive years. For EU companies with over 1,000 employees but less than EUR 450 million in turnover, reporting under the EU Taxonomy is optional. However, if they claim to operate in an environmentally friendly way, they must include details about this in their management report.
Temporary Reporting Break
The updated proposal changes the start date for when companies must follow the sustainability reporting rules. Instead of starting in 2026, large companies (with over 1,000 employees) will now begin in 2027. In addition, each EU country can choose to allow companies with fewer than 1,000 employees to skip reporting for the 2026 financial year. This gives smaller companies, including some public interest entities and parent firms, a break from reporting in 2026, if their country allows it.
Value Chain Clarity
The new changes aim to reduce the effort needed to collect sustainability data from business partners. Companies will not be required to ask partners with fewer than 1,000 employees for extra data unless it is a common practice in their industry. Under separate due diligence rules, companies also do not need to ask direct partners with fewer than 500 employees for detailed data if the same information can be found elsewhere.
Due Diligence Defined
The new rules state that companies must carefully assess their own activities, their subsidiaries, and their direct business partners, especially in cases where there is a risk of harm, such as environmental damage or human rights violations. They must also check indirect partners (like suppliers of their suppliers) if they have a strong reason to believe a risk exists or may arise. If a company tries to hide a risky partner by using a middleman, it is still required to investigate.
Audit Pressure Off Until 2028
The new plan removes the previous idea that the EU would introduce stricter audit standards by October 2028. This change helps companies avoid higher costs. For now, companies will continue using “limited assurance”, a lighter type of audit, for their sustainability reports. The EU will provide guidance in 2026 to explain how these limited checks should be carried out.
Conclusion
The EU wants to make sustainability reporting more balanced and fair. By focusing on large companies and giving smaller ones an exemption, the new rules aim to reduce stress and costs. Companies will still need to act responsibly, but they will have more time and simpler ways to do so. These changes show that the EU is listening to businesses and working to improve the reporting process for everyone.