EU Lawmakers Scale Back Sustainability Reporting & Due Diligence Rules

The European Parliament’s Committee on Legal Affairs has approved amendments to the Corporate Sustainability Due Diligence Directive (CSDDD), significantly reducing the number of companies subject to its sustainability reporting and due diligence requirements. Under the revised rules, the obligations will apply only to firms with at least €1.5 billion in annual turnover and 5,000 or more employees. Additionally, the requirement for the EU to establish a civil liability regime has been eliminated, and companies are encouraged to adopt a risk-based approach to due diligence. These changes aim to simplify compliance for businesses, particularly smaller firms, by narrowing the scope of the directive. While proponents argue that the amendments will reduce costs and enhance competitiveness, critics express concern that the reduced scope may undermine corporate accountability and transparency, potentially allowing human rights and environmental issues in supply chains to go unaddressed. The vote on the amendments was passed with 17 in favor, 6 against, and 2 abstentions. Jörgen Warborn, the rapporteur for the directive and a member of the European People's Party, emphasized that the revisions would provide predictability for European companies while maintaining progress towards the EU's green transition goals.