The EU sustainability compliance and reporting rollbacks. Are they moving things forward?
When the European Green Deal was launched in December 2019, it set the tone for the EU to be a world leader in addressing climate change issues. The comprehensive plan aimed at making the European Union climate-neutral by 2050, with at least 50% greenhouse gas emissions cut by 2030.
Roll forward to 2025 and the strong regulatory stance of recent years is being noticeably softened.
What happened?
Business lobbies, non-EU trading partners and some national governments have argued that the previous requirements were too burdensome, especially for mid-sized firms and SMEs, and would lead to reduced competitiveness, particularly in global markets. As a response the EU released the Omnibus Simplification Package.
The rollbacks have not sat well with environmental groups and some states that see weaker reporting and due diligence obligations as undermining transparency, reducing accountability for environmental and social harm, and potentially increasing the risk of greenwashing. Critics argue that excluding most SMEs and mid-sized firms (the engine that drives most EU economies) means an enormous percentage of economic activity, including supply-chain suppliers and sub-contractors, will escape oversight.
So what the Omnibus package contained?
Narrowed scope of who must report or comply
The Corporate Sustainability Reporting Directive (CSRD), originally intended to include many thousands of companies, is being scaled back. Under the new arrangements (December 2025 provisional agreement), only companies with more than 1,000 employees and an annual net turnover above €450 million, will be required to comply.
Similarly, for the Corporate Sustainability Due Diligence Directive (CSDDD), the threshold under which companies must carry out supply-chain due-diligence has been raised so that now only companies with more than 5,000 employees and €1.5 billion turnover will be in scope.
Delayed implementation and postponed deadlines
Implementation dates for both CSRD and CSDDD have been pushed back. Compliance for many companies has been postponed by one or more years and for some companies in later ‘waves’, such as listed SMEs, reporting obligations have been referred further.
Simplified obligations, less detailed reporting, and weaker due-diligence burdens
The simplification includes reducing the complexity and breadth of required reporting. Fewer environmental metrics are included, less social and supply-chain detail, and reduced due-diligence (ie limiting obligations to tier-1 suppliers). For firms now excluded, sustainability reporting becomes largely voluntary under draft rules. Many businesses will no longer be legally required to disclose full ESG or climate-related information.
Civil liability at the EU level for breaches of due diligence obligations have been removed. Instead, national-level mechanisms remain, with varying strength according to country.
Removed certain climate-related obligations and plans
Earlier proposals included requirements for climate transition strategies. Under the new deal these have been dropped.
The emphasis has moved away from mandatory climate-aligned documentation to a much-reduced reporting burden on the basis that the move will make business regulation more competitive.
The details of the changes:
| Policy/Directive | Rollback/Change | Affected Parties | Status |
| Corporate Sustainability Reporting Directive (CSRD) | Scope narrowed: mandatory sustainability reporting now only for companies with > 1,000 employees and > €450m turnover. Smaller companies mostly excluded. | Circa 80% of previously in-scope SMEs and mid-sized firms. | Political agreement reached. Moving towards final adoption. |
| Corporate Sustainability Due Diligence Directive (CSDDD) | Higher thresholds: only firms with > 5,000 employees and €1.5b turnover must perform supply-chain due diligence. Civil liability dropped. | Most EU companies now exempt. Supply-chain accountability weakened. | Deal reached and positioned as a competitiveness measure. |
| Supply-chain scope under due-diligence rules | Reduced focus to tier-1 suppliers only, rather than full supply chain. | Multinationals with complex chains face fewer checks. | Embedded in simplificatioOngoing concerns about governance.n package. |
| Climate transition plan requirements | Mandatory climate-alignment strategy requirements removed from law. | Large corporates no longer have to document Paris-alignment plans. | Rolled back in legislative negotiations. |
| Reporting timelines | Application of reporting rules delayed, especially for listed SMEs. | Thousands of firms will experience years of delay. | EU Parliament and EU Council agreement. |
| Independent oversight and transparency | EU Ombudswoman criticised the ‘rushed’, low-transparency process for rule changes. | Oversight bodies, and civil society. |
The above begs the question: ‘what’s left of the previous regulations?’
The directives themselves, CSRD and CSDDD, remain. Instead of a full rollback they have been simplified and narrowed. Large multinationals, especially those with significant scale and revenue, are still subject to mandatory reporting and due-diligence obligations; and some form of sustainability disclosure remains for in scope entities, albeit simplified.
The bigger question, of course, is what the changes mean in terms of the EU drive for sustainability leadership, and how will companies now out of scope will proceed.
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