EU Parliament Backs Major Simplification of Sustainability Reporting & Supply-Chain Due Diligence

European Parliament approved a landmark reform package to simplify two major EU sustainability regulations:

• CSRD – Corporate Sustainability Reporting Directive
• CSDDD – Corporate Sustainability Due Diligence Directive

The changes aim to reduce administrative burden, especially for SMEs, while ensuring that the largest companies continue to report ESG performance and manage human rights and environmental risks across their supply chains.

Changes Under CSRD (Reporting Rules)

1. Smaller Scope – Fewer Companies Must Report

Only large companies must report if they exceed:

• 1,750+ employees, and
• €450 million turnover.

This excludes many mid-sized organizations from mandatory sustainability reporting.

2. ESG Reporting Requirements Simplified

• Reduced qualitative detail
• Sector-specific standards become optional
• Focus shifts to core material impacts

3. Climate Transition Plans Removed

Companies are no longer required to publish transition plans aligned to the Paris Agreement, reducing long-term climate documentation efforts.

4. Lower Burden on SMEs

SMEs will face less pressure from customers demanding additional ESG data. Reporting remains voluntary, not mandatory.

5. EU Digital Portal for Support

A new EU-wide digital platform will provide:

• Free templates
• Guidance
• Reporting tools

Lowering compliance costs significantly.

Changes Under CSDDD (Due-Diligence Rules)

1. Applies Only to Very Large Corporations

CSDDD now applies only to companies with:

• 5,000+ employees, and
• €1.5 billion turnover

This removes thousands of businesses from legally binding supply-chain due diligence.

2. Risk-Based Approach

Companies must assess:

• Where human rights violations are likely
• Where environmental harm is probable

No need for full supply-chain screening.

3. Reduced Burden on Small Suppliers

Large firms may collect information from small suppliers only when essential, offering relief to SMEs in the automotive, electronics, chemical, and textile sectors.

4. National-Level Enforcement

Member States will manage enforcement and liability.
Victims retain the right to compensation for proven harm.

Importance for Industry

OEMs & Tier-1 Suppliers

• Still responsible for reporting (CSRD)
• Must conduct risk-based due diligence (CSDDD)
• Can expect simpler templates and more flexibility

Tier-2 & Tier-3 Suppliers

• Reduced ESG reporting pressure
• Due-diligence requests will be targeted, not exhaustive

ESG / Compliance Teams

• Assess if your company still falls under CSRD/CSDDD thresholds
• Update reporting structures
• Shift from blanket checks to risk-focused assessments

Next Steps & Timeline

• 18 November 2025: Parliament–Council trilogue negotiations begin
• Late 2025: Final adoption expected
• Companies should begin preparing internal processes for the simplified requirements

Reference: EU ESG