EU supports significant simplification of CSDDD reporting requirements
The Corporate Sustainability Due Diligence Directive (CSDDD) in Europe has recently undergone significant updates following the Council of the European Union’s decision on June 23, 2025. These changes affect the scope, timing, and obligations of large companies regarding sustainability reporting and climate transition planning.
### Updated Status and Key Changes of CSDDD
The Council has endorsed a mandate to streamline requirements between CSDDD and the Corporate Sustainability Reporting Directive (CSRD), aiming to reduce overlap and complexity in sustainability regulations.
Applicability Thresholds Raised: The CSDDD will now apply only to very large companies with at least 5,000 employees and €1.5 billion in net turnover. This is a substantial increase from the earlier threshold of 1,000 employees and €450 million turnover, effectively narrowing the scope to companies best equipped to handle due diligence obligations.
Risk-Based Approach: The directive adopts a risk-based due diligence model rather than a comprehensive entity-based mapping of impacts. Companies must conduct a general scoping exercise focused on areas where adverse sustainability impacts are most likely, rather than exhaustive mapping of all operations.
Scope Restriction: Due diligence obligations are confined to the company’s own operations, subsidiaries, and direct business partners. There is a review clause for possible expansion in the future, but initially the scope is more limited compared to earlier proposals.
Climate Transition Plans: Companies covered by the directive must adopt climate change mitigation transition plans, but the deadline for this obligation has been deferred by two years. Supervisory authorities will have a role in advising companies on the design and implementation of these plans.
Civil Liability: The Council maintains the removal of an EU-wide harmonized civil liability regime. Instead, enforcement and liability matters will be handled by national legal systems, not under a uniform EU framework.
Transposition Deadline Extended: EU Member States now have until July 26, 2028, to transpose the directive into national law, a delay from earlier timetables.
### Impact on Large Companies
Only the very largest companies meeting the high employee and turnover thresholds must comply initially, which reduces the number of companies subject to CSDDD obligations to roughly 3,400 corporate groups within the EU.
These companies are required to conduct human rights and environmental due diligence focusing on actual risks and adverse impacts in their operations and immediate value chains. They must integrate climate transition plans into their sustainability policies, with supervisory authorities overseeing compliance and advising on effective implementation.
The streamlined risk-based approach and narrowed scope are intended to make compliance more manageable while maintaining a focus on key sustainability risks. Companies will continue to have to report sustainability information under the CSRD, but the Council’s mandate seeks to harmonize and reduce duplication between CSRD and CSDDD reporting requirements.
In summary, the Council of the European Union’s recent decision has raised the bar for applicable company size, narrowed due diligence scope, deferred climate transition plan obligations, and extended the transposition deadline for the CSDDD. This approach aims to balance ambitious sustainability goals with practical implementation considerations for Europe’s largest companies.
The announcement was made during the Polish presidency of the Council, near its end. The Council of the European Union's decision to downgrade current proposals for sustainability reporting in Europe has not been addressed in this paragraph. The deadline for implementing the new CSDDD rules into national law has been pushed back to 2028, while the deadline for the implementation of the Omnibus Package, aimed at simplifying and streamlining reporting rules, has not been specified in this paragraph. The new proposals will increase the employee threshold for CSDDD compliance from 1,000 to 5,000 and the turnover threshold from €450m to €1.5bn. The European Commission has proposed a new set of proposals for the Corporate Sustainability Due Diligence Directive (CSDDD), and Denmark is set to take over the presidency of the Council from July onwards. The new proposals will exempt a significant number of large companies from due diligence obligations, according to environmental campaigners.
- The updates to the Corporate Sustainability Due Diligence Directive (CSDDD) in Europe have led to changes in the business and finance sector, as large companies now have to focus on human rights and environmental due diligence through a risk-based approach in their operations and immediate value chains.
- In the realm of policy-and-legislation and politics, the Council of the European Union has streamlined requirements between CSDDD and the Corporate Sustainability Reporting Directive (CSRD), aiming to reduce complexity in sustainability regulations and to better align with general-news events such as climate change and human rights issues.
