20 June, 2025

A major shift is underway in the EU’s approach to corporate sustainability and it’s raising more questions than answers.

A tug of war is playing out between the European Commission and the Parliament and Council over how far and fast to push ESG regulation. The Commission has sought through the Omnibus to narrow the scope and ease obligations, especially for smaller companies, citing administrative burdens. At the same time, the EU standards body EFRAG has also announced plans to significantly reduce mandatory datapoints under the sustainability reporting rules, aiming to cut them by more than 50%. The EU Council has pushed back, defending key parts of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). This back-and-forth is a standard part of EU policymaking, with the institutions now headed for negotiations to hammer out a final compromise.

But this week, Jörgen Warborn, the European Parliament’s chief negotiator on the EU Omnibus, has published a draft report proposing sweeping changes to the regulation that go even further than the Commission’s earlier rollbacks.

One of the most significant changes proposed by the Omnibus was a dramatic reduction in scope for CSRD, raising the threshold to cover only companies with more than 1,000 employees, from the current 250 employee threshold. This new proposal raises that even further to 3,000 employees and introduces a €450 million turnover requirement.

It also introduces major changes to CSDDD, including the removal of mandatory climate transition plans (CTPs), eliminating the requirement for companies to show how they intend to decarbonise. In a world racing to limit the impacts of climate change, that’s a glaring omission.

There’s also a subtle but meaningful change in language: replacing “value chain” with “chain of activities.” It may sound minor, but this narrower definition would likely reduce the breadth of disclosures and undermine transparency.

The proposal further limits data collection from suppliers. While the Commission’s Omnibus introduced voluntary SME standards (VSMEs) to reduce reporting burdens, Warborn’s draft goes further, retaining the VSME limits, raising the SME threshold and allowing companies to meet obligations by explaining their efforts to obtain information and relying on data already public or previously obtained unless adverse impacts are suspected.

WWF warned the proposed changes would “effectively dismantle the reporting ecosystem” relied on by banks, insurers, and investors. Green MEPs and others have already indicated their intent to defend the original ambition of the legislation.

Final positions from the Parliament and Council are due in October, which will then kick off three-party negotiations, so we may still end the year uncertain about the outcome. However, if this proposal is taken forward, the future of EU sustainability reporting could look very different — and far less robust. We’ll be keeping a close eye on how things unfold, and we’ll let you know if (or when) the plot thickens.

By Meg Seckel