EU Parliament backtrack threatens to further weaken reporting rules

The Parliament aims to exclude a further 900 companies from already watered-down sustainability reporting rules. With the final phase of negotiations in process, GWI breaks down what to expect.

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The European Parliament has reversed its position on the Corporate Sustainability Reporting Directive (CSRD), now backing a higher 1,750-employee threshold that would exempt a further 900 companies from reporting. With the reporting obligations of the CSRD already planned to be scaled back, Parliament’s proposal would further weaken corporate environmental disclosure rules in the EU. 

The controversial directive has been at the heart of a fierce debate since the ‘Omnibus’ package was announced in February, promising to simplify sustainability reporting and due diligence rules, and reduce the number of companies required to comply. 

Companies have faced months of uncertainty as EU lawmakers battled over the scope of the package, yet the key decision-making bodies are still split on which companies should ultimately be required to report on sustainability. 

A split bag 

In October, the European Parliament’s Legal Affairs Committee (JURI) initially agreed on its position for a 1,000-employee threshold for companies to be in scope of CSRD. This broadly aligned with the positions laid out by the European Council and Commission, suggesting a relatively smooth path to adoption.  

However, this move was blocked when at least 10% of MEPs requested the mandate be put to a full plenary vote, claiming that the proposal warranted wider parliamentary input. The subsequent vote on 13 November resulted in Parliament’s revised stance, which sets a 1,750-employee threshold. 

Although each position differs slightly, all are a far cry from the original CSRD, which came into effect in 2024 and had a 250-employee threshold, encompassing around 50,000 companies. The thresholds being debated currently represent around a 90%-92% reduction in scope. 

Trilogue negotiations between the Commission, Council and Parliament are currently underway, aiming to reach a consensus on the CSRD and Corporate Sustainability Due Diligence Directive (CSDDD) by 8th December. With the EU bodies still in disagreement over the scope of the directives however, a compromise will be needed to get over the line. 

“I think it will swing more towards the Parliament position, as the appetite in the Council for simplification is rather big,” Andreas Rasche, professor of business, focusing on corporate sustainability, at Copenhagen Business School told GWI. “A final decision on a legal text will bring more legal clarity for businesses. However, and at the same time, it will also introduce more uncertainty as many businesses will need to decide for themselves whether they report in the future.”  

For investors and users of sustainability information, it remains to be seen if the Voluntary Sustainability Reporting Standard for non-listed Micro, Small and Medium-sized Enterprises (VSME) will serve as a meaningful alternative to the CSRD and its reduced scope. Adopted in July 2025, the VSME provides a set of scaled-down, voluntary sustainability standards designed to be more accessible for small and medium enterprises. The standards are expected to be used for reports published in 2026.

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EU INSTITUTIONS' POSITIONS ON CSRD NEGOTIATIONS

While there is dispute among the three EU institutions on the details of the incoming Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDD), all three aim to see it watered down from the original proposals.

	Original thresholds	European Commission proposal (26 Feb)	European Council position (21 Jun)	European Parliament compromise (13 Nov)
CSRD	250 employees + €40m net turnover	1,000 employees + €50m net turnover or €25m assets	1,000 employees + €450m net turnover	1,750 employees + €450m net turnover
No. of companies in scope of CSRD	Around 50,000	9,235	4,792	3,914
CSDDD	1,000 employees + €450m net turnover	No change	5,000 employees + €1.5bn net turnover	5,000 employees + €1.5bn net turnover
No. of companies in scope of CSDDD	Around 7,000	Around 7,000	1,300	1,300

Source: Andreas Rasche

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The other side of the coin 

The final decision over the Omnibus changes will come as the European Financial Reporting Advisory Group (EFRAG) plans to unveil its draft simplified European Sustainability Reporting Standards (ESRS) on 4th December. Companies in scope of the CSRD are required to use the ESRS to comply with the Directive. 

A July exposure draft of the simplified ESRS significantly scaled back water-related disclosures, though it is unclear if further changes will be made in EFRAG’s final technical advice to the European Commission. The Commission aims to adopt the simplified ESRS via a delegated act for use from the 2027 financial year.

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TIMELINE OF THE CSRD SIMPLIFICATION PROCESS

Source: GWI