EU Lawmakers Reach Consensus on Sustainability Reporting and Due Diligence Reform

In a significant development shaping the future of corporate sustainability in Europe, lawmakers in the European Parliament have reached an agreement on a negotiating position for the EU Commission’s Omnibus I initiative — a major reform aimed at simplifying sustainability reporting and due diligence requirements for companies across the European Union.

The new agreement, forged after weeks of intense negotiation among political groups, strikes a balance between regulatory simplification and maintaining Europe’s leadership in sustainable business practices. It sets the stage for a more streamlined, predictable, and business-friendly sustainability framework that continues to uphold high standards of environmental and social accountability.

A New Chapter for EU Sustainability Regulations

The Omnibus I initiative, introduced by the European Commission earlier this year, is part of a broader effort to boost European competitiveness and reduce administrative burdens for companies without undermining the EU’s green and social commitments.

The proposal seeks to amend several cornerstone sustainability laws — including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the EU Taxonomy Regulation, and the Carbon Border Adjustment Mechanism (CBAM).

Under the new Parliamentary compromise, the scope of companies required to report or perform due diligence will change significantly, providing relief to small and medium-sized enterprises (SMEs) while focusing resources on the largest and most impactful corporations.

Key Reforms at a Glance

At the heart of the agreement are major adjustments to the CSRD and CSDDD, two of the EU’s most ambitious corporate sustainability regulations.

1. Corporate Sustainability Reporting Directive (CSRD):

• The reporting requirement will now apply to companies with more than 1,000 employees and €450 million in annual revenue.
• This change replaces the previous 250-employee threshold, reducing the compliance scope by nearly 80% and allowing smaller firms to focus on operational sustainability rather than complex reporting.
• The measure aims to ensure that sustainability reporting remains relevant, actionable, and proportional, targeting companies with the greatest economic and environmental influence.

2. Corporate Sustainability Due Diligence Directive (CSDDD):

• The due diligence threshold has been raised to cover companies with 5,000 employees and over €1.5 billion in annual revenue.
• The approach will shift from a broad entity-based model to a risk-based framework, prioritizing due diligence where the likelihood of human rights or environmental harm is highest.
• This change ensures efficiency and focus, while retaining the EU’s leadership in responsible global supply chain management.

3. Broader Impact on EU Business Climate:

• The Omnibus reforms are expected to cut unnecessary red tape, aligning sustainability goals with business growth.
• By focusing on the largest corporations, lawmakers believe the EU can maintain high impact while allowing SMEs to innovate and grow with fewer compliance barriers.

Political Compromise and Collaboration

The negotiations leading up to the agreement were marked by sharp divisions among political parties in the European Parliament.

Left-leaning parties advocated for stronger social and environmental safeguards, arguing that weakening reporting and due diligence obligations could undermine the EU’s Green Deal commitments. In contrast, right-leaning and pro-business parties called for significant deregulation, even suggesting scrapping the CSRD and CSDDD altogether to boost competitiveness.

In the end, a “compromise package” proposed by Jörgen Warborn, the Omnibus rapporteur and member of the European People’s Party (EPP), brought both sides together. The proposal maintained the Commission’s plan to retain the 1,000-employee CSRD threshold, introduced a revenue criterion, and set higher limits for the CSDDD.

Warborn’s mediation prevented a potential alignment between centrist and far-right lawmakers that could have led to deeper cuts — such as raising thresholds to 3,000 employees and removing climate transition plan requirements.

The final deal represents a measured middle ground — one that simplifies reporting while preserving Europe’s sustainability vision.

A Step Toward Business-Friendly Sustainability

The compromise is being widely viewed as a pragmatic recalibration of EU sustainability policy. Industry groups have welcomed the focus on predictability and proportionality, saying it will make compliance less costly and more efficient, especially for Europe’s mid-sized enterprises that form the backbone of the economy.

Analysts suggest that by targeting reporting toward large, resource-rich firms, the EU can improve the quality and consistency of sustainability data, enhancing its value for investors and regulators. Meanwhile, companies not directly covered will continue to benefit indirectly through value chain expectations and voluntary frameworks.

This rebalancing act also reinforces the EU’s message that sustainability and competitiveness can coexist — provided that regulations are smartly designed and effectively implemented.

Aligning with the Council’s Position

Several aspects of Parliament’s agreed position align closely with that of the EU Council, particularly the employee and revenue thresholds and the risk-based approach to due diligence. This alignment is expected to smooth the path for inter-institutional negotiations, reducing the likelihood of prolonged policy deadlock.

The next steps include a vote in Parliament’s Legal Affairs Committee early next week, followed by a plenary vote later this month to finalize Parliament’s position before negotiations with the Council begin.

Once adopted, the Omnibus I package could mark one of the most consequential recalibrations of EU sustainability regulation in years, redefining how Europe balances corporate accountability with business agility.

Balancing Simplification and Sustainability

Critics of the reforms caution that narrowing the scope of regulations could dilute the EU’s influence on global corporate responsibility standards. However, supporters counter that quality of implementation matters more than quantity of coverage.

By focusing on risk-based due diligence and impact-driven reporting, the revised framework aims to reduce complexity without sacrificing ambition. It also seeks to ensure that companies focus their sustainability resources where they can make the most meaningful difference — particularly in sectors with high environmental or social risk.

Moreover, the integration of digital reporting tools and data transparency standards under the CSRD will continue to advance the EU’s leadership in ESG governance and climate disclosure.

A Leaner, Smarter Sustainability Agenda

As the EU navigates a changing geopolitical and economic landscape, the Omnibus I initiative signals a shift toward practical sustainability regulation—one that protects Europe’s environmental commitments while promoting competitiveness and innovation.

The Parliament’s consensus on the CSRD and CSDDD thresholds demonstrates that cooperation remains possible even amid political polarization. By focusing on the largest and most impactful businesses, the EU is ensuring that sustainability remains ambitious, credible, and achievable.

As the vote in Parliament approaches, all eyes will be on Brussels to see how this balance between simplification and sustainability will shape the next chapter of corporate responsibility in Europe.

For more in-depth analysis and inspiring climate news, click here.