On June 23, 2025 the Council of the EU, which represents the 27 EU Member States, agreed on its negotiating mandate for the Corporate Sustainability Reporting Directive (“CSRD”) and Corporate Sustainability Due Diligence Directive (“CSDDD”) omnibus simplification.

This follows the European Commission’s omnibus proposal from February and is the next step in the EU’s legislative process. Once the European Parliament reaches its own negotiating position (likely after the summer), the three EU institutions (Commission, Council, and Parliament) will enter into “trilogue” negotiations. Their ultimate compromise on CSRD and CSDDD simplification will then become EU law (potentially by late 2025 or early 2026), and will subsequently need to be transposed by the Member States into national law applicable to companies. This blog summarizes the Council’s position on key points.

Council Position on CSDDD

• Applicability Thresholds:
  • Proposes to have one single applicability threshold without bigger companies coming into scope earlier than smaller ones.
  • For EU-incorporated companies: 5,000 employees and EUR 1.5 billion in net worldwide turnover (on a consolidated basis for EU ultimate parent companies of corporate groups).
  • For non-EU-incorporated companies: EUR 1.5 billion in net turnover generated in the EU (on a consolidated basis for non-EU ultimate parent companies of corporate groups).
• Timing:
  • Proposes postponing the application of the CSDDD to companies to July 26, 2029 (i.e., one more year than the agreement in the “stop the clock” Directive from April this year).
  • Similarly proposes to move the Member State transposition deadline by one year to July 26, 2028.
• Scope of Due Diligence:
  • For own operations, subsidiary operations, and direct business partners (tier 1): Retains the two-step structure for identifying and assessing adverse impacts but only in a company’s own operations, subsidiary operations, and direct business partners (where related to its chain of activities).
    • Step 1: Risk Scoping Exercise: Instead of an overall mapping of the entire chain of activities, companies are to carry out a “scoping” exercise based on reasonably available information to identify areas where adverse impacts are likely to occur across their own operations, subsidiary operations, and where related to their chain of activities, direct (but not indirect) business partner operations. 
    • Step 2: In-Depth Risk Assessment: Proposes that the second step of in-depth assessments will generally be limited to the areas where adverse impacts were identified to be most likely to occur and most severe.
  • For indirect business partners (tier 2+): Proposes that companies must:
    • Map their chain of activities to “identify” their indirect business partners in their 2+ tiers based on reasonably available information.
    • Conduct in-depth risk assessments on indirect business partners where the company has, or can reasonably be expected to know of, “objective and verifiable information that suggests” that adverse impacts have arisen or have a reasonable prospect of arising (replacing the Commission’s proposed “plausible information” threshold).

• Information Cap: Submits that companies will only be allowed to request information from any direct business partner for the Step 1 scoping exercise where that information is necessary. For direct business partners with fewer than 1,000 employees, such information requests can only be made when the information cannot reasonably be obtained by other means. 

• Climate Transition Plans (“CTPs”):
  • Retains the obligation to adopt CTPs but agrees with the Commission proposal to no longer require that they are “put into effect.” Instead, CTPs are to include an “outline” of “implementing actions.”
  • Proposes that the adoption of CTPs is optional for the first two years of CSDDD application, and empowers supervisory authorities to advise on these plans.

• Supervisory Authority Penalties: Suggests replacing the maximum Member State supervisory authority penalty of “not less than” 5% of net worldwide turnover to simply “5%” of the company’s net worldwide turnover.

• Civil Liability: Supports the Commission’s proposal to remove the mandatory EU-wide civil liability regime. Retains most alignment measures, including on full compensation, for those Member States that do have a civil liability regime.

Council Position on CSRD

• Applicability Thresholds:
  • Would narrow scope by excluding EU companies with less than EUR 450 million in net turnover and fewer than 1,000 employees (on a consolidated basis for parent companies).
  • Proposes to similarly limit applicability to non-EU ultimate parent companies with more than EU 450 million in net turnover generated in the EU.

• Information Cap: Supports that information requests be limited to the information set out in the voluntary small and medium enterprises standards (the “VSME” standards) for companies that do not have more than 1,000 employees.

• Updated ESRS (not in Council position, but relevant development): The Commission has formally requested that the European Financial Reporting Advisory Group (“EFRAG”) prepare drafts of the revised European Sustainability Reporting Standards (“ESRS”) by November 30, 2025. EFRAG provided a progress report on June 20, 2025, and released its first drafts of the simplified ESRS on July 10. The public consultation period on these drafts is expected to run from the end of July to the end of September.

Council Position on EU Taxonomy Article 8 Reporting

• Scope of Article 8 Disclosures: As a consequence of the proposal for a higher CSRD applicability threshold, and because CSRD and Taxonomy thresholds are linked, many companies would also no longer be in scope Taxonomy reporting.
  
  We note that the Commission also appears poised to simplify the Taxonomy delegated acts by, among other things, introducing a materiality threshold, providing flexibilities to financial firms, and revising some Do No Significant Harm (“DNSH”) criteria.

• Partial Taxonomy Reporting: Proposes to delete partial Taxonomy reporting for smaller companies as those companies are now out of scope of CSRD—and thus Taxonomy reporting—altogether.

Overall, the Council’s general approach goes further than the Commission’s legislative proposal in reducing the scope of the CSRD and CSDDD. Still, for the large companies that remain in scope of the CSRD and CSDDD the two laws, working in tandem, still represent significant legal obligations related to sustainability reporting and human rights and environmental due diligence.

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If you have any questions concerning the material discussed in this post, please contact the members of our Environmental, Social, and Governance (ESG) practice.

This blog post was written with the contributions of Pol Revert Loosveldt.