The European Parliament’s legal committee approved amendments that significantly narrow the scope of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). The changes Will be limiting its application to companies with 5,000 or more employees and at least 1.5 billion euros in turnover. The existing law applies to companies with 1,000 employees and 450 million euros turnover. It will also eliminate the requirement for companies to develop transition plans aligned with the Paris Agreement climate goals.
This regulatory rollback aims to reduce compliance burdens and operational costs for large companies amid concerns about European industrial competitiveness in a global market.
The directive, which became effective in July 2024, mandates companies to identify, prevent, and mitigate adverse human rights and environmental impacts throughout their global supply chains. Non compliance attracted fines up to 5% of global turnover. The legislation covers approximately 6,000 large EU companies and around 900 non-EU multinationals active in Europe. Prior to these changes, the CSDDD was part of a broader EU corporate sustainability framework designed to foster transparency and accountability. It was driving a notable increase in corporate climate transition planning — with over 54% of companies reporting such plans and 40% committing to net-zero targets in 2025.
The proposed amendments have mixed reaction – dawning support from industry groups. And some EU member states argue that the directive’s initial scope could disproportionately impact European competitiveness and administrative overheads.
However, the revisions face strong criticism from investors, civil society, and sustainability advocates who warn that scaling back due diligence obligations will weaken corporate accountability, diminish investor confidence, and risk derailing the EU’s climate and human rights objectives. This push-and-pull reflects the high stakes involved, as sustainable business practices are increasingly linked to capital access, operational resilience, and long-term value creation.
The revised directive is subject to final approval by the European Parliament and Council. Maintains penalties for corporate wrongdoing and requires companies to provide clear due diligence disclosures. It also warrants supplier compliance through contractual assurances and third-party verification.
The timeline for phased implementation has been extended, with new compliance thresholds applying from 2027 onward for the largest companies. This development highlights ongoing tensions within the EU between advancing ambitious sustainability regulations and preserving industrial competitiveness. This signals a complex path ahead for sustainable corporate governance in Europe.
