Diluting Directives: EU CSRD, CSDDD Diminished
June 25, 2025
The European Council has agreed on a negotiating mandate to “simplify” sustainability reporting and due diligence requirement as part of the European Commission’s first omnibus package.
The Commission’s omnibus simplification package, formally unveiled in late February as reported by Minerva Analytics, looks to reduce the sustainability reporting burden for companies by modifying the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD). Separately, confusion has emerged over the Green Claims Directive in rumours it was to be withdrawn by the Commission.
In the eyes of many, the changes to the CSDDD and CSRD significantly water down the directives and their intended impacts.
The CSDDD aims to promote sustainable and responsible corporate behaviour both in companies’ operations and throughout their global value chains. Meanwhile, the CSRD looks to enhance the availability and reliability of sustainability information while fostering a culture of transparency regarding companies’ impact on people and the environment.
The Council’s position most dramatically impacts CSDDD. The Council has proposed increasing the thresholds of the directive to 5000 employees and €1.5 billion (U$1.7 billion) net turnover. This would mark a significant shift from the directive’s original thresholds of companies with more than 1,000 employees and a worldwide turnover surpassing €450 million.
A change to the scope of the CSDDD was not covered by the Commission’s omnibus proposal.
“Overall, the Council goes much further than the Commission in terms of rolling back regulations, especially the new CSDDD threshold is a significant problem,” Andreas Rasche, Professor of Business in Society at the Copenhagen Business School Centre for Sustainability, commented in a LinkedIn post. “This significantly reduces the scope of due diligence, even to an extent where one needs to question its impact overall.”
The Council agreed with the Commission’s proposal to align provisions on transition plans for climate change mitigation with the CSRD. The Council’s position also includes postponing the obligation to adopt transition plans by two years.
The mandate additionally looks to postpone the directive’s transposition deadline by one year to July 26, 2028.
NGO ShareAction’s Interim Head of EU Policy Richard Gardiner also questioned whether the CSDDD is “still worth having if this is the final outcome”.
Recent reports have highlighted concerns from legal experts and economists over the lobbying in the reduction of the CSDDD’s thresholds. A report published this week by Social LobbyMap showcased companies and trade associations that looked to weaken the directive, analysing consultation responses and other forms of engagement from 88 companies and trade associations.
The research found that financial sector and cross-sectoral trade associations were prominently opposed to elements of the CSDDD. Just eight of the finance entities analysed expressed overall supportive positions on the directive, while 17 entities were not supportive or adopted opposing views.
Meanwhile, cross-sectoral trade associations were found to be the least supportive group analysed in the report. Only three held overall supportive positions, while 19 were found not to be supportive of the CSDDD.
On CSRD, the Council agreed with the Commission’s proposal to increase the employee threshold to 1000 employees and to remove listed small and medium enterprises from the scope of the directive.
The Council also added a net turnover threshold of over €450 million to “further alleviate the reporting burden on undertakings”.
This threshold matches a suggestion made by the European Parliament’s Committee on Economic and Monetary Affairs (ECON) last month, as reported by Minerva Analytics. However, it does not go quite as far as ECON’s suggestion to raise the directive’s threshold to 3,000 employees.
ECON argued that the amendment would support the goals of the omnibus package by simplifying rules and lowering the reporting burden for EU companies.
The full implementation of the CSRD was due to take place in 2028 encompassing companies with a net turnover exceeding €150 million within the EU and at least one subsidiary or branch meeting specific thresholds.
“With the scope of both CSDDD and CSRD drastically reduced, thousands of companies will fall outside of reporting and due diligence obligations, and investors will lose access to sustainability data they need to assess risk and allocate capital,” said Thibault Giradault, Sustainable Finance Policy Officer at the WWF European Policy Office in a statement.
Law firm ClientEarth has warned that legal experts have identified “strong grounds” for challenges to the EU Commission’s Omnibus proposal if passed into a law, noting that the Council has increased this legal risk by “further undermining” the CSDDD.
The European Parliament now needs to reach a negotiating position on the changes to the two directives. Once this position is finalised, the Council will negotiate with the European Parliament in the “trilogue negotiations”, mediated by the European Commission. Trilogues are expected to be completed around Q1 2026, depending on when the Parliament’s position is agreed.
The omnibus simplification package is the first of four outlined by the Commission, which published the Omnibus IV Simplification Package last month. The Commission claims that the omnibus packages will save in annual administrative costs of around €6.3 billion and to mobilise additional public and private investment capacity of €50 billion.
On June 20 2025, it was widely reported that a Commission spokesperson had said it intended to withdraw the long-awaited Green Claims Directive. The decision was announced just three days before the final set of talks to finalise the law were set to take place on June 23.
However, reports emerged on June 25 in which a Commission official stated that Commission President Ursula von der Leyen never pushed to scrap the Green Claims Directive and still supports it.
The stated aims of the Green Claims Directive are to make green claims reliable, comparable and verifiable across the EU, protect consumers from greenwashing and establish a level playing field on the environmental performance of products
On June 18, the centre-right European People’s Party, the party of President von der Leyen, sent a letter to Environment Commissioner Jessika Roswall requesting that the directive be axed. The letter argued that the Green Claims Directive risked “unduly hindering sustainability communication through procedures that are overly complex, administratively burdensome, and costly”.
The Commission introduced the Green Claims Directive in March 2023, with negotiations on the final text of the draft law starting in January 2025. The final set of talks to conclude the directives were due to take place earlier this week, with members of the left leaning Renew and Socialists and Democrats parties convening a press conference on June 23 to address the rumoured withdrawal of the directive.
However, severe damage may have been done to the Green Claims Directive due to Italy reportedly withdrawing its support by pulling the mandate it had given the Council’s Polish presidency to negotiate on its behalf.
Italy pulling its support means there was no longer a majority backing the deal, halting negotiations. EU ambassadors were due to further discuss the topic on June 25 according to the Polish presidency.
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Last Updated: 25 June 2025