EU Parliament Agrees Position on CSRD and CSDDD: Major Scope Reductions Ahead

On 13 November 2025, the European Parliament agreed its negotiating position on the EU’s sustainability reporting (CSRD) and due diligence (CSDDD) frameworks, confirming what was expected – a significant shift in the EU regulatory landscape. The vote, which passed with 382 in favour, 249 against and 13 abstentions, sets the stage for negotiations with the European Commission and Council starting 18 November.

What Has Changed?

Parliament’s position dramatically scales back the scope of both directives:

CSRD

• Reporting obligations would apply only to companies with more than 1,750 employees and annual turnover above €450 million, reducing the number of in-scope companies by well over 90%.
  Originally, Wave 2 (reporting on 2025 data in 2026) included companies meeting at least two of: >250 employees, turnover >€50 million, or total assets >€25 million. Wave 3 (reporting on 2026 data in 2027) included listed SMEs meeting two of: >10 employees, turnover >€900k, or total assets >€450k.

• Sector-specific reporting becomes voluntary, and qualitative detail requirements are reduced.

• Requests for sustainability information by large business partners of smaller companies not in scope will be limited to the information set out in the VSME Standard.

CSDDD

• Due diligence duties would cover only the largest corporations – those with over 5,000 employees and turnover exceeding €1.5 billion, aligning with the Council’s position.
  Originally, thresholds were >500 employees and turnover >€150 million, so this change reduces the number of in-scope companies by around 70%.

• In-scope businesses should adopt a risk-based approach to monitoring and identifying negative impacts on people and the planet, using existing information wherever possible. Additional requests from smaller business partners should be a last resort.

• Companies will no longer need to prepare transition plans to align their business models with the Paris Agreement.

• Liability for non-compliance shifts to the national level, rather than the EU level.

EU Taxonomy

• The Taxonomy rules, which define sustainable economic activities and investments, will apply only to companies in-scope under the new CSRD thresholds.

The Parliament also called on the Commission to create a digital portal providing free access to templates, guidelines, and information on EU reporting requirements, aiming to simplify compliance for businesses.

Why Does This Matter?

These changes set the course for one of the most significant rollbacks of EU sustainability legislation since its inception. The new thresholds mean that tens of thousands of companies previously in scope will fall outside coverage, raising concerns among some stakeholders about the EU’s ability to maintain robust environmental and human rights standards across value chains.

Supporters argue the move will reduce administrative burden and boost competitiveness.

Next Steps

Trilogue negotiations between the European Commission, the Council of the European Union and the European Parliament begin next week. Although the goal is to agree on a final text by the end of 2025, each of these institutions have, for the most part, adopted different negotiating mandates on scoping thresholds and requirements. In any case, full implementation will take longer, as the Directive must first be adopted at EU level and transposed into national law by Member States.

Danesmead Perspective

For investors and corporates, this development signals a strategic pivot in compliance and sustainability planning. Although the legislation is not finalised, it is clear that ambition will be significantly scaled back. So what does this mean?

Reasons to be positive:

• Reduced compliance burden: Budgets earmarked for regulatory reporting could now be reallocated toward action and outcomes on sustainability, rather than compliance.

• Strategic benefits remain: Concepts such as double materiality and supply chain assessments provide insights that can strengthen competitive advantage and social license to operate. Many companies we speak with have been continuing these processes as they look to leverage the benefits of such an exercise.

• Global alignment: Other jurisdictions are moving toward enhanced sustainability disclosures. The ISSB aims to create a global baseline, with jurisdictions representing over 55% of global GDP committed to adopting its standards. This standardised approach should enable better comparability for investors across jurisdictions.

Challenges

• Loss of ambition: Europe risks stepping back from its position as a global sustainability leader.

• Reduced incentives: Companies that haven’t started assessing sustainability impacts now have little regulatory motivation to do so, which risks lowering business’ awareness and action on harms to people, the environment, and overall business resilience.

• Transparency gap: Capital markets may face higher due diligence costs or hidden risks that remain undiscovered until too late.

At Danesmead, we advise investors and their portfolio companies on regulatory developments and compliance. We’re here to help interpret what these changes mean for you and discuss how to navigate them effectively.