EU Sustainability Regulations - Is Change on the Horizon?

On the 14th of October 2025, the European Parliament’s Committee on Legal Affairs voted to propose changes to EU sustainability rules, including the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).

The committee’s proposal is that thresholds for falling within scope of reporting requirements are raised, meaning fewer companies will now be subject to the regulations.

Proposed CSRD Threshold:

• At least 1,000 employees during a fiscal year
• An annual turnover exceeding EUR 450 million (formerly EUR 50 million)

Proposed CSDDD Threshold:

• At least 5,000 employees during a fiscal year (formerly 1,000)
• An annual turnover exceeding EUR 1.5 billion (formerly EUR 450 million) for EU companies
• An annual EU turnover exceeding EUR 1.5 billion for non-EU companies

If approved by the EU Parliament in a general vote, this change means fewer companies will likely report to these standards, even though companies can choose to voluntarily report if they fall below the threshold. For investment firms offering ESG and other sustainability-related products and services, this would mean less information is available for ESG assessments and other due diligence on potential investments.

That said, it is probable that some companies that fall below the thresholds will still choose to report to the CSRD and CSDDD standards (despite the lack of any legal obligation), but others will not. It is, therefore, perhaps advisable for investment firms to be wary of punishing firms that report, simply because counts of non-conformances or grievances within supply chains may be disclosed.

Is it better to be transparent about any issues and failings, or to keep them quiet? Surely, the former should be encouraged, and not the latter?