A victory for the business community in Europe

Last week, the European Parliament has voted to reduce the scope of the Corporate Sustainability Reporting Directive (CSRD) and the related Corporate Sustainability Due Diligence Directive (CSDDD). Reporting obligations for CSRD will only apply to companies or organisations with revenue of more than €450m and more than 1,000 employees. The CSDDD which is an EU law requiring large companies to identify, prevent, and mitigate adverse human rights and environmental impacts across their global value chains and to report on these efforts. Further, negotiations between the European Parliament, Council of the EU and European Commission were to take place to finalise all amendments by the end of this year.

Main elements of the provisional agreement are as follows:

• CSRD scope: Applies to EU companies with at least 1,000 employees and €450 million in net turnover. For non-EU companies, the threshold is €450 million net turnover generated within the EU, plus either an EU branch or subsidiary generating at least €200 million turnover annually.
• CSDDD scope: Covers EU companies with at least 5,000 employees and €1.5 billion in net turnover. Non-EU companies are in scope if they generate the same net turnover within the EU.
• Review clause: Both the CSRD and CSDDD scopes will be subject to future review, allowing for potential adjustments.
• Exclusion of financial holding companies: Financial holding companies are excluded from the CSRD’s scope.
• Relief for stranded “Wave 1” companies: Companies that began reporting for financial year 2024 but will no longer be in scope under the new thresholds are permitted to stop their CSRD reporting.
• Transition plan requirement removed: The obligation to adopt and put in place a climate change mitigation transition plan under CSDDD has been removed. The requirement under CSRD to report on whether a climate transition plan is in place remains.
• Risk-based due diligence: Due diligence under CSDDD is not limited to tier 1 partners but follows a risk-based approach, requiring companies to base their efforts only on reasonably available information.
• Civil liability: No EU-wide civil liability regime under CSDDD is introduced; civil liability remains governed by national law.
• Penalties: A maximum penalty of 3% of net worldwide turnover applies under the CSDDD, with the Commission to provide further guidance.
• Implementation timeline: The CSDDD’s transposition deadline is postponed by one year to 26 July 2028. Companies will have to comply with the new measures by July 2029.
• Digital portal: A new digital portal will provide businesses with access to templates and guidelines on EU and national reporting requirements.

If you have any questions about it please do not hesitate to contact SFA Public Affairs Lead, Jonathan McDade at Jonathan.McDade@sfa.ie or 01 605 1688.