The European Parliament has officially backed a major streamlining of the EU’s sustainability reporting and corporate due diligence obligations—signaling a shift toward “less but clearer” ESG requirements, concentrated on the very largest companies. This update forms part of the Omnibus I Simplification Package, aimed at reducing administrative burden and improving competitiveness across the EU.

Narrower Scope for Sustainability Reporting

The Parliament proposes that only very large companies—those with more than 1,750 employees and over €450 million in annual turnover—should be required to produce social and environmental disclosures under the Corporate Sustainability Reporting Directive (CSRD). These same firms would also retain obligations under the EU Taxonomy, the EU’s system for classifying environmentally sustainable economic activities.

To further reduce reporting burdens:

• Reporting standards would be simplified, with fewer qualitative details and no mandatory sector-specific disclosures.

• Large companies would be restricted from demanding additional ESG information from small suppliers beyond what voluntary standards require.

This represents a significant shift from the existing CSRD scope, which captures companies with as few as 250 employees.

Due Diligence Obligations Limited to the Largest Multinationals

Parliament also endorsed a narrower version of corporate due diligence obligations—rules requiring companies to identify and mitigate negative impacts on people and the environment across their operations and supply chains. Under the new position:

• Only companies with more than 5,000 employees and over €1.5 billion in turnover would fall in scope.

• Companies must take a risk-based approach, relying on existing information and requesting extra data from smaller suppliers only as a last resort.

• Transition plans would be removed. Companies would not be required to develop a climate transition plan aligned with the Paris Agreement.

• Liability would shift to the national level, meaning enforcement and remedies—including victim compensation—would occur within member states.

• Companies could face national fines for non-compliance, with guidance jointly provided by the European Commission and member states.

Digital Portal to Support Businesses

As part of its simplification push, Parliament wants the European Commission to create a free digital portal where companies can access:

• Templates for sustainability reporting

• Guidance notes

• A consolidated overview of EU-level reporting and due diligence obligations

This is designed to complement the European Single Access Point (ESAP) and ease compliance across the EU.

Legislative Outlook: Final Rules Expected by End of 2025

With 382 votes in favor and 249 against, Parliament adopted its negotiation position. Talks with EU member state governments begin on 18 November, with both institutions targeting completion of the revised legislation by late 2025.

These changes come after delays in the implementation of CSRD sector standards and the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). The broad political intention is clear: reduce reporting fatigue, protect SMEs, and refocus ESG obligations on companies with the largest footprints and resources.

Why This Matters for ESG Leaders

For sustainability and compliance teams, this proposal is an important signal of how the EU intends to balance climate ambition with economic competitiveness. If adopted:

• Fewer companies would need to report under CSRD, and those that do would face a lighter disclosure package.

• Due diligence expectations would concentrate on only the very largest EU and non-EU companies.

• Transition planning would no longer be a legal mandate, reducing alignment pressure with Paris-agreement pathways.

• SMEs would see meaningful relief, both directly and through reduced disclosure demands from their larger customers.

As negotiations unfold, companies already investing in full CSRD and CSDDD readiness should continue preparing—but should also stay closely aligned with the evolving simplification discussions.