Lawmaker groups holding a majority in the European Parliament have agreed to scale back the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), further narrowing the number of companies that would be required to identify and address human rights and environmental harms in their value chains.
The deal, reached late on Wednesday, raises the thresholds so that the rules would apply only to firms with at least 5,000 employees and €1.5bn in turnover, compared with the current scope of 1,000 employees and €450m.
The accord was struck between the centre-right European People’s Party (EPP), the Socialists & Democrats (S&D) and Renew. Jörgen Warborn, the EPP lead on the file, said the objective was to simplify the regime for European business and support growth. Socialist negotiators accepted the compromise after warnings that the EPP could instead assemble a majority with far-right groups for a more sweeping rollback. Dutch Socialist MEP Lara Wolters resigned as S&D negotiator in protest.
CSDDD entered into force in July 2024 and requires in-scope companies to conduct due diligence on adverse impacts in their operations and supply chains, backed by administrative sanctions that can reach up to 5% of global turnover and civil liability provisions at member-state level. National transposition is due by July 2026, with phased application thereafter. The Parliament’s latest move does not change those fundamentals but would significantly reduce the number of companies captured by the directive.
The political context has shifted since adoption. EU capitals, notably Berlin and Paris, have pressed for simplification of a cluster of sustainability files, arguing that regulatory complexity and overlapping obligations hamper competitiveness. The Commission has separately consulted on easing elements of the wider sustainability rule-book. In parallel, the United States has urged Brussels to dial back corporate environmental and due-diligence requirements that would reach US multinationals, adding transatlantic pressure to the debate.
Under the Parliament’s cross-group agreement, firms below the new 5,000-employee/€1.5bn turnover threshold would fall out of scope. Supporters say concentrating obligations on the largest companies will cut compliance costs and administrative burden. Opponents, including some civil society groups and investors, warn that shrinking the perimeter risks weakening accountability across supply chains, where abuses and environmental damage often occur at arm’s length from parent companies. The EPP argues the compromise preserves the law’s core duties while making it more workable; S&D describes the deal as the least-worse outcome given the arithmetic of the chamber.
The Parliament is expected to vote on the revised mandate later in October. If endorsed, trilogue negotiations with the Council would follow to settle the final text. Any agreed changes would then be reflected in national implementing laws in the run-up to the 2026 deadline, unless institutions decide to modify the transposition timetable. Procedurally, alterations to material scope—such as company thresholds—would have a direct effect on which entities are obliged to prepare due-diligence policies, conduct risk mapping, take remedial measures and report on outcomes once application dates begin to bite.
The directive sits alongside the Corporate Sustainability Reporting Directive (CSRD) and other green-industrial policies. Earlier this year, drafts circulating in Brussels suggested easing or delaying parts of that broader framework, including plans to narrow reporting standards and lighten due-diligence expectations for indirect relationships. Wednesday’s agreement goes further than proposals aired in the first half of 2025 by raising the CSDDD thresholds substantially above earlier options considered by negotiators.
For companies that remain in scope, the compliance baseline is unchanged: boards will need to ensure governance structures for due diligence, identify and prioritise salient risks, engage with suppliers, set and monitor corrective action, and document processes in line with supervisory expectations. Enforcement will continue to rest with national authorities, coordinated through an EU network, with potential penalties and civil-liability exposure where firms fail to meet statutory duties. The precise contours of those obligations—particularly around indirect business relationships—will depend on the final compromise struck with the Council.
Campaign groups and some businesses that backed the original directive are expected to lobby MEPs ahead of the plenary vote, arguing that narrowing coverage could create uneven standards across sectors and supply chains. Business associations representing large multinationals are likely to support the Parliament’s direction of travel, framing the change as a targeted adjustment rather than a retreat from sustainability objectives. With a majority coalition in place, attention now turns to whether member states will accept the higher thresholds or seek a different balance in trilogue.
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