EU Countries Give Final Approval to Weaken Company Sustainability Laws

On February 24, 2026, member states of the European Union (EU) granted final approval to a legislative package that scales back key corporate sustainability reporting and due diligence requirements under the EU’s flagship ESG regulatory framework, in a move aimed at reducing compliance burdens on businesses.

The changes were endorsed at a meeting of EU ministers in Brussels and wrap up a reform process driven by competing pressures between industry competitiveness and environmental accountability.

The revisions significantly narrow the scope of the Corporate Sustainability Due Diligence Directive (CSDDD), confining its reach to only the largest firms - those with more than 5,000 employees and at least €1.5 billion (about $1.8 billion) in annual turnover. Equivalent thresholds now also apply to non-EU companies with substantial EU market presence. This is a major departure from earlier proposals that would have covered thousands of additional companies across the bloc.

In addition, the implementation deadline for CSDDD has been extended to mid-2029, compared with earlier schedules targeting compliance by mid-2027 for the biggest companies, and a previously agreed requirement for companies to adopt corporate climate transition plans has been dropped entirely.

The package also amends the Corporate Sustainability Reporting Directive (CSRD) by raising reporting thresholds so that only companies with more than 1,000 employees and €450 million in turnover - along with non-EU firms meeting the same criteria - will fall under mandatory sustainability disclosure rules.

Proponents of the reforms say the changes reflect a simplification of reporting obligations and a reduction of regulatory red tape for European businesses facing stiff competition globally.

However, the scaled-back requirements have drawn criticism from environmental groups, investors, and civil society organisations who warn that narrowing the scope of sustainability laws could make it harder to track and hold companies accountable for environmental harms and human rights abuses in their operations and supply chains.

Critics also argue that loosening obligations now could weaken the EU’s ambition to lead global corporate sustainability standards.

Final approval on weakened CSRD/CSDDD scope becomes the new baseline for corporate reporting infrastructure planning, though voluntary disclosure pressure remains from investors and value-chain counterparties. Our ESG-strategy and sustainability-due-diligence teams help clients evaluate what these revised rules mean for reporting infrastructure and value-chain due diligence.