EU eases company sustainability requirements after months of negotiations, and plenty of outside pressure, and member states signed off on a major legislative package on February 24, 2026. This deal updates two big rules: the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD). Now, only the biggest companies need to tackle environmental and human rights risks in their supply chains, and smaller and mid-sized businesses mostly don’t have to worry about these rules anymore.

Narrower Scope for Reporting and Oversight

Possibly the most surprising feature of the reforms has been the significant cut that has been made to the scope of corporate sustainability obligations. As a result of the changes to the CSRD, only those businesses with more than 1,000 employees and an annual turnover of €450 million will be required to report on their environmental and social impacts.

As a result, the number of businesses that will be required to report their sustainability data will be significantly reduced, with an estimate that up to 90% of those businesses that were previously required to report will now be outside the scope. This change will seek to simplify procedures by better aligning reporting obligations with larger businesses.

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Tighter Due Diligence Rules for Larger Companies

The European Union (EU) has amended and introduced new rules about corporate social responsibility obligations to follow in order to help improve the sustainability of business practices within Europe. As a result of these changes to the rules, only large organisations operating within the EU (that is, those with more than 5000 employees and with annual revenue above €1.5 billion) are now obliged to adopt due diligence processes to address human rights and environmental-risk issues across their supply chains.

In addition to the new threshold requirements, the previously proposed mandatory obligation for all companies to develop and implement climate transition plans and a common liability framework across the EU for harms caused by a company’s operations has been totally eliminated from the directive. The compliance date has also been extended to at least mid-2029 for all companies within its scope, which does allow for extra time.

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Economic and Political Pressures Behind the Shift

It was not just pressure from inside that pushed for a change; it was also international pressure that came from countries like the United States and Qatar, which had earlier warned that the initial set of regulations for due diligence could create issues with their energy trade relations, especially when it came to gas supplies.

However, it seems that the new set of regulations that has been introduced is a move towards a more pragmatic approach to regulations, which has been brought about as a result of concerns regarding competitiveness in a global environment. EU eases company sustainability requirements; the question now is whether this is a fair move for long-term sustainability.

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