The European Parliament’s Committee on Legal Affairs has voted to amend the European Union’s corporate accountability law, making significant changes to business sustainability reporting and due diligence requirements. This move modifies the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), which last year mandated firms to address human rights and environmental issues within their supply chains or face penalties amounting to 5% of their global turnover.
Under the newly approved amendments, only companies generating at least €1.5 billion in annual turnover and employing 5,000 or more people will be required to comply with these rules. Crucially, the mandate for creating an EU-wide civil liability regime will be removed, and companies will be encouraged to adopt a risk-based approach to due diligence. These amendments significantly reduce the number of businesses subject to these requirements and can be seen as a relaxation compared to the original scope of the regulation. Details about these adjustments can be found through the JURIST report.
However, the amendments have sparked concerns that the changes may dilute corporate accountability since the requirements will now predominantly affect only large enterprises. Originally, the European Commission had suggested that the criteria be loosened to cut the number of companies undertaking social and environmental reporting by 80%. Despite these concerns, the Committee’s vote passed with 17 in favor, six against, and two abstentions, reflecting a strong support for the compromised measures.
Jörgen Warborn, the rapporteur and a member of the center-right European People’s Party, advocated for the changes by stating, “Today’s vote confirms our support for simplification. We are delivering predictability for European companies, with a report that cuts costs, strengthens competitiveness, and keeps Europe’s green transition on track.” Warborn’s comments highlight the perceived benefits of the changes, emphasizing economic efficiencies and competitive advantages for EU companies.
The amendments align with a broader understanding within the EU of prioritizing business competitiveness while balancing the green transition. According to Politico’s analysis, the adjustments reflect internal negotiations and are part of a continuing dialogue on the balance between regulatory obligations and economic imperatives.
These adjustments are now set to influence how businesses within the European Union approach sustainability, as policymakers strive to navigate between robust accountability and fostering a business-friendly environment in Europe.