Now that negotiations on the proposed amendments to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) have commenced, it seems a good time to reflect on the positions of each EU institution. In this article, we consider the key amendments proposed to CSRD and CSDDD, and compare the negotiating positions of the European Parliament (the Parliament) and the Council of the EU (the Council) against the initial proposals of the European Commission (the Commission).
Background
By way of reminder, the Commission published its proposed amendments to CSRD and CSDDD in February 2025 as part of the Omnibus I package of legislation. Certain proposals were dealt with swiftly by way of the “Stop the Clock” Directive. In June 2025, the Council's negotiating position was approved. The Council proposes notable changes to some of the Commission's proposals, such as proposed increases to the thresholds of CSRD and CSDDD.
Getting agreement on the Parliament's position proved challenging (see here for a reminder) and was only achieved on 13 November. The political wrangling that made agreement difficult ultimately resulted in the Parliament’s position going further than the amendments proposed by either the Commission or the Council. For example, the Parliament is seeking a further increase to the employee threshold before businesses fall within scope of the sustainability reporting obligations under CSRD and proposing the complete removal of the requirement under CSDDD for in-scope businesses to adopt and put into effect a climate transition plan.
Trilogues (inter-institutional) negotiations began last week, on 18 November, between the co-legislators (the Council and the Parliament) and the Commission. While the Commission can continue to assert its viewpoint, ultimate decision-making powers rest with the co-legislators during this process. The first four-column table covers every amendment proposed by each of the EU institutions. We will now look at the most significant of these.
The positions
CSRD - PROPOSED AMENDMENTS
1. Scope
Commission proposal:
The Commission proposes amending the thresholds for falling within scope of the sustainability reporting obligations so that such obligations only apply to large undertakings or groups with more than 1,000 employees, and either a net turnover of more than €50m or a balance sheet total greater than €25m.
Reporting obligations would continue to apply to non-EU companies generating a net turnover in the EU of €150m, but only where the EU subsidiary is a large undertaking, or the branch generates more than €50m in turnover (up from €40m).
For those no longer required to mandatorily report, a form of the voluntary SME (VSME) standards developed by EFRAG will be adopted as a delegated act, with its use to be encouraged.
Council’s position:
The Council agrees with the Commission’s proposal to increase the employee threshold to 1,000 but proposes increasing the net turnover threshold to €450m.
It seeks to introduce a review clause concerning a possible extension of the scope to ensure adequate availability of corporate sustainability information.
The Council agrees with the Commission’s proposal regarding non-EU companies.
Parliament’s position:
The Parliament proposes increasing the employee threshold to 1,750 and follows the Council in seeking to increase the net turnover threshold to €450m. It also proposes an exemption for undertakings defined as financial holding undertakings.
The Parliament also seeks to introduce a transition period for the inclusion of recently acquired subsidiaries within a parent undertaking’s consolidated sustainability statement.
With regards to non-EU companies, the Parliament proposes that only subsidiaries or branches generating more than €450m in EU turnover should be in scope.
2. Taxonomy reporting
Commission proposal:
The Commission proposes introducing flexibility in reporting on Taxonomy alignment for in-scope undertakings with a net turnover not exceeding €450m.
Council’s position:
Deleted as the Council proposes increasing the threshold for falling within scope of CSRD and as a result reporting on Taxonomy alignment to €450m.
Parliament’s position:
Deleted as the Parliament proposes increasing the threshold for falling within scope of CSRD and as a result reporting on Taxonomy alignment to €450m.
3. Value chain cap
Commission proposal:
The Commission proposes that in-scope companies be limited in the type of information that they can request from those in their value chain with less than 1,000 employees. It is proposed to limit this to the information specified in the VSME standards and any additional sustainability information that is commonly shared between undertakings in the sector concerned.
Council’s position:
The Council follows the Commission’s proposal but removes the reference to additional sustainability information that is commonly shared between undertakings in the sector concerned.
The Council also puts forward a new provision that contract clauses will not be binding if they seek information beyond the scope of the VSME standards from entities in the value chain with less than 1,000 employees
Parliament’s position:
The Parliament also follows the Commission’s proposal to limit the information that may be sought from entities in the value chain, but applies its new proposed thresholds of 1,750 employees and turnover above €450m.
4. European Sustainability Reporting Standards (ESRS)
Commission proposal:
In addition to adopting the VSME standards, the Commission proposes deleting the requirement for sector specific and listed SME standards.
The Commission has also indicated that it intends to adopt a delegated act to amend the ESRS to substantially reduce the number of mandatory datapoints.
Council’s position:
The Council follows the Commission’s proposals relating to the ESRS.
Additionally, it proposes that the Commission could support undertakings by providing sector-specific guidance and that, where considered appropriate, relevant international standards could be taken into account.
Parliament’s position:
The Parliament also follows the Commission’s proposals and, similarly to the Council, proposes that the Commission should publish sector-specific guidelines although it suggests that these be voluntary in nature and that they be developed in consultation with relevant stakeholders.
CSDDD - PROPOSED AMENDMENTS
1. Scope
Commission proposal:
The Commission does not propose amendments to CSDDD’s scope.
Council’s position:
The Council proposes increasing the thresholds to 5,000 employees and €1.5bn net turnover (worldwide for EU companies and generated in the EU for non-EU companies).
Parliament’s position:
The Parliament agrees with the Council’s proposed new thresholds.
2. Climate transition plan
Commission proposal:
The Commission proposes amending the language to remove reference to a climate transition plan being “put into effect” and replacing this with a reference to “implementing actions”.
Council’s position:
The Council generally follows the Commission’s proposals but with some changes in language, such as requiring businesses to make “reasonable” rather than “best” efforts.
The Council also suggests postponing the obligation to adopt transition plans by two years.
Parliament’s position:
The Parliament proposes the complete removal of the requirement for in-scope companies to draw up and publish a climate transition plan.
3. Due diligence requirements
Commission proposal:
The Commission proposes limiting, as a general rule, the requirement for companies to proactively assess actual or potential adverse impacts in value chains to direct (‘tier 1’) business partners. This requirement would only extend to an indirect business partner in circumstances where the company has “plausible” information to suggest an adverse impact in respect of that business partner.
The Commission also proposes limiting the information in-scope companies can seek from direct business partners with fewer than 500 employees to the information specified in the VSME standards.
Council’s position:
The Council’s proposes limiting due diligence requirements to a company’s own operations, those of its subsidiaries, and those of its tier 1 business partners.
It also proposes moving from an entity-based to a risk-based approach to due diligence. This would require in-scope companies to carry out a more general scoping exercise based on reasonably available information to identify areas where actual and potential adverse impacts are most likely to occur.
This requirement would extend to an indirect business partner only if the company had “objective and verifiable” information to suggest an adverse impact in respect of that business partner (instead of the Commission’s “plausible information” standard).
The Council also introduces a review clause relating to a possible extension of these obligations beyond tier 1 business partners.
Parliament’s position:
The Parliament also opts for a risk-based approach to due diligence.
Its position is that in-scope companies should rely on already available information and only request additional information from their smaller business partners as a last resort.
This risk-based approach focuses only on partners with high-risk profiles, considering factors like geography, sector, and operations. If scoping reveals verifiable risks, companies must carry out deeper assessments in those areas, with discretion to prioritise direct partners such as tier 1 suppliers.
Where an in-scope company acquires another company that is not within scope, the Parliament proposes a two-year transition period to allow the acquiring company to integrate the processes of the purchased company into its due diligence policy.
4. Civil liability
Commission position:
The Commission proposes removing the EU-wide harmonised liability regime.
The proposal would leave national law to define whether its civil liability provisions override otherwise applicable rules of the third country where the harm occurs. It would preserve victims’ rights to compensation under domestic law.
Council’s position:
The Council follows the Commission’s proposals on civil liability.
Parliament’s position:
The Parliament’s position is similar to that of both the Commission and the Council, but it also proposes removing the review clause which would allow this decision to be reconsidered in the future.
5. Penalties
Commission proposal:
The Commission proposes removing the minimum cap for fines (currently 5% of worldwide turnover) and instead issuing guidance to assist national authorities in determining the appropriate level of penalties.
Council’s position:
The Council follows the Commission’s proposals relating to the issuance of guidance but suggests that Member States should be required to set a maximum limit for pecuniary penalties of 5%.
Parliament’s position:
The Parliament supports the concept of Commission guidance.
It proposes that the guidance should advocate taking into account the turnover of companies when calculating penalties.
6. Digital portal
The Parliament introduces a new proposal for the Commission to establish a digital portal for businesses, providing free access to templates, guidelines and information on reporting requirements, in line with the European Single Access Point (ESAP).
Next steps
The intention is to get agreement on the proposed amendments and have this amending directive agreed by the end of 2025. Once finalised, the directive will be published in the Official Journal of the EU and Member States will then have 12 months to transpose it into national law.
With thanks to Niamh Walshe for her assistance with this article. For further information in relation to these topics, please contact Jill Shaw, ESG & Sustainability Lead, Anne O’Neill, Practice Development Lawyer, Erin Ward, Solicitor, or any other member of the ALG ESG & Sustainability team.
