Corporate sustainability

Due diligence

EU rules on corporate sustainability due diligence require large EU companies and non-EU companies active in the EU to take measures to prevent, identify and mitigate any adverse impact on human rights or the environment, caused by:

their own operations
the operations of their subsidiaries
the operations carried out by their business partners

Penalties and civil liability will apply to any violation of these obligations.

Objectives

These new rules mean:

more sustainable production of goods and services
better conditions for workers
more sustainable investment
increased transparency on how products are made

Sustainable production

Sustainable investment

Better working conditions

Transparency

Reporting

Under the EU's rules on corporate sustainability reporting, large companies covered by those rules need to report on four areas.

Environmental matters

Anti-corruption measures

Human rights

Diversity issues

Companies are required to publish detailed information on how their business affects society and the economy and vice versa ('double materiality').

The new rules, which entered into force on 5 January 2024, aim to:

equip investors to take decisions that benefit both people and the environment
increase companies' accountability
ease the transition to a sustainable economy

European sustainability reporting standards

Companies will be required to report in accordance with European sustainability reporting standards (ESRS).

Those common standards ensure that companies across the EU report comparable information and help them to communicate their sustainability performance more efficiently.

Reducing the regulatory burden

In February 2025, in order to achieve its objective of at least a 25% reduction in administrative burdens and at least 35% for SMEs, the European Commission proposed amendments to the corporate sustainability due diligence and the corporate sustainability directives in its first 'omnibus' package.

On 24 February 2026, the Council gave its final green light to simplify sustainability reporting and due diligence requirements, with a view to boosting EU competitiveness.

Council signs off simplification of sustainability reporting and due diligence requirements to boost EU competitiveness (press release, 24 February 2026)

Simplification of EU rules

Simplifying requirements

The scope of the corporate sustainability due diligence directive is narrowed to cover only companies with more than 5 000 employees and above €1.5 billion net turnover, as these companies are considered to have the biggest influence on their value chain and to be best equipped to absorb the costs of due diligence processes.

The simplification of requirements will enable companies to:

prioritise assessing adverse impacts involving direct business partners
limit the amount of information that may be requested from smaller business partners in a company's chain of activities
benefit from more time to comply with the new measures

Furthermore, the updated rules remove the obligation to adopt a transition plan for climate change mitigation and provide for a maximum cap of 3% of the company's net worldwide turnover, as a penalty for failure to apply the rules correctly.

Companies will have to comply with the new measures by July 2029.

Making reporting easier

The scope of the corporate sustainability reporting directive is narrowed to cover only companies with more than 1 000 employees and above €450 million net turnover.

Regarding third-country undertakings, the updated requirements will apply only to companies with a net turnover above €450 million for the parent undertaking within the EU and above €200 million generated turnover for the subsidiary or branch.

The simplification measures made to the directive:

reduce the number of undertakings subject to sustainability reporting requirements and enable companies falling outside the new scope to submit voluntary reports
revise and simplify the ESRS
limit the amount of information that may be requested from smaller business partners within the reporting company's value chain
postpone reporting requirements for large companies
provide for a transition exemption for companies that had to start reporting from the 2024 financial year (the so-called 'wave one' companies), exempting them for 2025 and 2026
include an exemption for certain EU and non-EU financial holding companies from consolidated reporting