European Union member states have approved major changes to corporate sustainability regulations. The move limits stricter obligations to larger firms and delays enforcement. Lawmakers say the revisions will reduce regulatory pressure on businesses while maintaining core sustainability goals.
EU countries agreed on the changes during a meeting in Brussels on February 24, 2026. The updated rules reshape both the Corporate Sustainability Due Diligence Directive and the Corporate Sustainability Reporting Directive.
Higher Thresholds for Due Diligence Rules
Under the revised framework, the Corporate Sustainability Due Diligence Directive will now apply only to companies with more than 5,000 employees and annual turnover above 1.5 billion euros. Non EU companies that generate the same level of revenue inside the bloc must also comply.
Regulators have capped penalties at 3 percent of a company’s global net turnover. In addition, authorities have postponed compliance by two years. Companies will now begin following the rules from mid 2029.
Earlier drafts required more companies to assess environmental and human rights risks across their supply chains. However, governments narrowed the scope after businesses raised concerns about costs and competitiveness.
Sustainability Reporting Rules Adjusted
The revised Corporate Sustainability Reporting Directive also raises the eligibility threshold. It now applies to firms with more than 1,000 employees and net turnover exceeding 450 million euros. Previous proposals included smaller companies.
Non EU companies with comparable revenue in the European market must follow the same reporting standards. However, lawmakers removed certain provisions, including mandatory climate transition plans.
Industry Pressure and Environmental Concerns
Negotiations between EU governments and the European Parliament began last year. Business groups argued that strict compliance requirements could weaken European competitiveness. Some governments outside the EU, including the United States, also supported easing the rules.
On the other hand, environmental organizations have criticized the revisions. They warn that scaling back reporting obligations could make it harder to identify truly sustainable companies. Investors may also face challenges in comparing environmental performance across firms.
The latest decision highlights the EU’s effort to balance sustainability goals with economic growth. While regulators aim to simplify compliance, the debate over corporate accountability is likely to continue.
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