The European Council’s Presidency and the European Parliament have reached a provisional agreement to significantly scale back sustainability reporting and corporate due diligence obligations, as part of a wider push to reduce regulatory burdens and strengthen the bloc’s competitiveness. The deal, agreed between members of the European Parliament’s Legal Affairs Committee and the Council, forms part of the so-called Omnibus I package, which aims to simplify existing EU sustainability rules.
Under the revised framework, sustainability reporting will apply only to EU companies employing an average of more than 1,000 people and with net annual turnover exceeding €450 million. For non-EU companies, reporting obligations will be triggered only where at least €450 million in turnover is generated within the EU. Co-legislators also agreed to simplify the content of reports, placing greater emphasis on quantitative information and making sector-specific reporting voluntary rather than mandatory.
Firms with fewer than 1,000 employees will be protected from indirect compliance pressures, as they will be entitled to refuse requests for sustainability information that go beyond what is set out in voluntary standards. To further ease compliance, the European Commission will be tasked with creating a digital portal providing access to templates and clear guidance on both EU and national reporting requirements.
More than 20 EU-wide European business organisations, including the European Enterprise Alliance, had urged EU policymakers to back the Omnibus I Simplification Package. The coalition argued the simplification effort is essential to reduce growing regulatory and administrative burdens, ensuring sustainability goals remain achievable without compromising economic competitiveness. They emphasise that simplification supports, rather than weakens, environmental ambition.
The agreement also sharply narrows the scope of corporate due diligence rules. Only very large EU companies with more than 5,000 employees and annual turnover above €1.5 billion will be required to carry out due diligence to identify and mitigate negative impacts on people and the environment. The same thresholds will apply to non-EU companies operating in the EU. Businesses within scope will be expected to adopt a risk-based approach across their chains of activities and to avoid imposing unnecessary information requests on smaller suppliers.
Notably, companies subject to the revised rules will no longer be required to prepare transition plans to align their business models with the Paris Agreement. Liability for non-compliance will remain at national level, with potential fines capped at up to 3% of a company’s worldwide net turnover, based on guidance to be issued by the Commission and member states. The Danish EU Council presidency estimates that the revised thresholds will exempt more than 85% of companies that would otherwise have fallen under the existing sustainability reporting regime.
The provisional deal now requires formal endorsement by both the European Parliament and the Council before adoption. The reforms stem from a broader political drive, launched in late 2024, to deliver a simpler and more business-friendly regulatory framework in response to concerns about Europe’s competitiveness and administrative burden, particularly on small and medium-sized enterprises.
Addressing a press conference in Strasbourg, Danish Minister for Industry, Business and Financial Affairs Morten Bodskov welcomed the agreement. “For too long, we thought rules and regulations were the way to create more jobs. The truth is quite the contrary. This agreement is a major step forward for Europe’s competitiveness, with fewer burdens and greater clarity, especially when it comes to green investments and green jobs. We have found the right balance, meaning that we can now move Europe forward”.
Rapporteur MEP Jörgen Warborn, (EPP, SE) said this deal delivers on creating growth in Europe. “This agreement brings historic cost reductions. There is no single file that cut reporting costs like this, in the history of the European Union. We have achieved something which is very good for businesses in Europe”.
