European Parliament Endorses Provisional Agreement on Sustainability Reporting and Due Diligence Simplification

As part of the Commission Omnibus I simplification package presented in February 2025, the European Parliament took a further step, endorsing a provisional agreement on updated corporate sustainability reporting and corporate sustainability due diligence requirements.

On 16 December 2025, the European Parliament endorsed the provisional agreement between MEPs and EU governments on updated corporate sustainability reporting and corporate sustainability due diligence requirements. The text was adopted with 428 votes in favour, 218 against and 17 abstentions, and the final text still requires formal approval by the Council. Parliament adopted its position at first reading on the Commission proposal COM(2025)0081, procedure 2025/0045(COD), amending Directives 2006/43/EC, 2013/34/EU, (EU) 2022/2464 and (EU) 2024/1760 as regards certain corporate sustainability reporting and due diligence requirements.

Reporting Scope and Thresholds

For sustainability reporting, the revised scope applies to undertakings that, on their balance sheet dates, exceed a net turnover of €450 million and an average number of 1,000 employees during the financial year. The reporting rules also apply to non-EU companies with net turnover in the EU of more than €450 million, including subsidiaries and branches generating net turnover in the EU of more than €200 million. The text also removes the Commission’s mandate to adopt sector-specific reporting standards by delegated acts, while allowing sector-specific guidance.

Safeguards for Smaller Undertakings and Voluntary Standards

Co-legislators state that reporting undertakings should not shift sustainability reporting responsibilities to smaller business partners. They also state that reporting undertakings should not require protected undertakings with fewer than 1,000 employees to provide information beyond what is included in the voluntary sustainability reporting standards. The adopted text requires the Commission, within four months of entry into force, to adopt a delegated act providing sustainability reporting standards for voluntary use by undertakings that do not exceed the average number of 1,000 employees during the financial year. The standards should be based on Commission Recommendation 2025/1710 in its original version, and the Commission should take into account technical advice from EFRAG.

Digital Support Measures and Reporting Format

The adopted position introduces a dedicated portal through which undertakings may access information, guidance and support, including relevant templates and other materials, on the mandatory and voluntary sustainability reporting framework. The portal should be interconnected with online support measures provided by Member States where they exist. The text also addresses the single electronic reporting format and provides that, until detailed rules on marking up are adopted under Delegated Regulation (EU) 2019/815, undertakings are not required to mark up their sustainability reporting.

Due Diligence Scope, Penalties and Application Date

For corporate sustainability due diligence, the revised scope applies where an EU company has, on average, more than 5,000 employees and net worldwide turnover of more than €1.5 billion, and where a third-country company generates net turnover of more than €1.5 billion in the Union. In-scope companies should carry out scoping exercises to identify areas in their chain of activities where adverse impacts are most likely to occur, and they should only ask for information from business partners with fewer than 5,000 employees when the information for in-depth assessment cannot reasonably be obtained by other means. The provisions on transition plans for climate change will no longer apply. The text provides for a maximum limit of pecuniary penalties of 3% of net worldwide turnover for failures to apply the rules correctly.

Next Steps and Timing

The due diligence directive will apply from 26 July 2029. Member States are to adopt and publish the measures necessary to comply by 26 July 2028 and apply them from 26 July 2029, with an exception linked to financial years starting on or after 1 January 2030. The directive will enter into force on the twentieth day following its publication in the Official Journal of the European Union.