Council document shows compromise on EU sustainability reporting reforms

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🗞️ Driving the news: On May 23, the Council of the European Union circulated a guidance document during a COREPER meeting, indicating a potential compromise on reforms to the EU’s sustainability reporting laws
• The document outlines alignment around simplifying the Corporate Sustainability Reporting Directive (CSRD) but reveals diverging views on the Corporate Sustainability Due Diligence Directive (CSDDD)
• The Council appears to support raising reporting thresholds, which could exempt up to 80% of companies from CSRD compliance

🔭 The context: The CSRD, adopted in 2022, and the CSDDD (or CS3D), passed in 2024, were central pillars of the European Green Deal’s corporate accountability framework
• The CSRD mandates detailed sustainability disclosures, while the CSDDD imposes legal obligations on companies to ensure ESG compliance across their value chains
• Political shifts during the 2024 European elections triggered pushback against these regulations, prompting the Commission to propose the Omnibus Simplification Package and issue a “stop the clock” directive to delay implementation

🌍 Why it matters for the planet: The scaling back of CSRD and CSDDD requirements risks diluting one of the most advanced regulatory frameworks for corporate sustainability transparency and accountability
• While easing compliance burdens for business, the changes may undermine efforts to standardize ESG disclosures and enforce climate and human rights obligations in supply chains
• A shift to a “risk-based” approach in due diligence could weaken oversight, particularly in high-risk sectors and regions

⏭️ What's next: The Council appears ready to accept the Commission’s proposed 1,000-employee threshold for the CSRD, but debate continues over whether to align it further with turnover thresholds
• On the CSDDD, the Council favors a risk-based approach aligned with OECD and UN frameworks, rather than broad entity-level due diligence
• Negotiations between the Council, Parliament, and Commission will determine the final shape of the Omnibus Package, with implementation delays likely extending into 2026 for most companies

💬 One quote: “The Presidency considers that the Commission’s proposal offers a balanced approach, preserving the policy objective of answering the market demand for sustainability information while significantly alleviating the reporting burden,” the Council document states

📈 One stat: The Commission’s proposed threshold change would exempt 80% of companies from CSRD reporting requirements

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