Introduction

On October 13, 2025, the European Parliament’s Legal Affairs Committee (JURI) approved a sweeping compromise to scale back the European Union’s corporate sustainability framework. The vote, part of the European Commission’s Omnibus I Simplification Package, marks a significant recalibration of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). Supporters describe it as a rational effort to reduce regulatory burdens and restore competitiveness, while critics see a retreat from the EU’s global leadership in sustainable business standards.

This decision followed months of political negotiation among the European People’s Party (EPP), Socialists & Democrats (S&D), and Greens/EFA. With 17 votes in favor, six against, and two abstentions, the JURI Committee’s compromise signals the start of a new phase in Europe’s ESG regulation, one that favors simplification over expansion.

Simplified Sustainability Reporting (CSRD)

Category	Previous CSRD Framework	JURI Compromise (Oct 2025)
Employee Threshold	250 employees	1,000 employees
Annual Turnover	€40 million	€450 million
Reporting Scope	Mandatory for all large and listed SMEs	Limited to large firms; voluntary for others
Sector-specific Standards	Mandatory by sector	Voluntary guidance only
Reporting Focus	Narrative and quantitative	Primarily quantitative
Support Tools	None unified	Digital one-stop portal via European Single Access Point

Under the new JURI proposal, the scope of the CSRD will narrow substantially. Companies required to report will now be limited to those with more than 1,000 employees and annual net turnover above 450 million euros. This threshold will exclude roughly 80 percent of the companies that were initially set to fall under the directive. For those outside the threshold, sustainability reporting becomes voluntary, following Commission guidelines.

The proposal also makes sector-specific reporting voluntary and reduces the overall number of data points. Companies will focus primarily on quantitative indicators rather than detailed narrative disclosures. To support compliance and consistency, the European Commission will create a digital one-stop portal integrated with the European Single Access Point. This online platform will provide free templates, guidelines, and relevant information to streamline corporate reporting.

Due Diligence Rules for Large Companies (CSDDD)

Category	Previous CSDDD Proposal	JURI Compromise (Oct 2025)
Employee Threshold	1,000 employees	5,000 employees
Annual Turnover	€450 million	€1.5 billion
Liability Regime	EU-level civil liability	National-level enforcement, no EU civil liability

JURI’s compromise raises the threshold for companies covered under the CSDDD. Only businesses with over 5,000 employees and an annual turnover exceeding 1.5 billion euros will need to comply, along with large foreign firms operating within the EU that meet the same criteria. Smaller companies, which were previously expected to implement due diligence across their supply chains, are now excluded.

Another key change is the shift from a universal to a risk-based due diligence approach. Instead of systematically requesting information from all business partners, companies will now be required to seek information only when there is a plausible risk of adverse impact on human rights or the environment. This change aims to reduce administrative complexity but may lead to inconsistent applications across industries.

The proposal also eliminates EU-level civil liability. Instead, companies found in violation of due diligence rules will face penalties under national laws. Fines will remain capped at five percent of global turnover. Although firms must still prepare transition plans aligned with the Paris Agreement, enforcement of these plans will depend on national discretion.

Political Drivers and Divisions

This compromise reflects short-term political expediency at the expense of long-term sustainability leadership, raising concerns that immediate economic considerations are overshadowing the EU’s broader environmental and social commitments.

The Omnibus I vote reflects deep divisions within the European Parliament. The EPP, which led the proposal, framed the reform as a victory for simplification and competitiveness. Rapporteur Jörgen Warborn emphasized that the reforms would deliver predictability for European companies and reduce bureaucratic barriers. The S&D group, despite initial resistance, supported the compromise to prevent an alliance between the EPP and far-right parties. In contrast, the Greens/EFA rejected the proposal entirely, warning that it undermines Europe’s commitment to accountability and environmental justice.

The political dynamic highlights a broader trend within the EU: growing pressure to balance climate ambitions with economic pragmatism. As debates over regulatory overreach intensify, ESG policy has become a central battleground between those prioritizing cost reduction and those defending comprehensive accountability.

What Happens Next

Upcoming Steps and Key Dates:

• October 20, 2025: Plenary vote in the European Parliament.
• October 24, 2025: Start of trilogue negotiations between Parliament, Council, and Commission.
• Late 2025 / Early 2026: Expected final adoption of the Omnibus I package.

The JURI mandate now moves to a plenary vote scheduled for October 20. If approved, interinstitutional negotiations between the European Parliament, Council, and Commission will begin on October 24. Observers expect final adoption of the Omnibus I package by late 2025 or early 2026.

For companies still within the scope of CSRD and CSDDD, the next stage will focus on adapting systems to the simplified reporting format. Mid-sized firms that fall below the new thresholds may now reconsider whether to continue voluntary disclosures, driven by investor expectations and supply chain demands. Meanwhile, regulators and national governments will need to clarify enforcement rules and ensure consistent application across member states.

Conclusion

The October 13 vote marked a decisive shift in how the European Union approaches corporate sustainability. By narrowing scope, simplifying requirements, and localizing liability, JURI’s compromise undermines years of progress on responsible business practices and casts doubt on the EU’s credibility as a sustainability frontrunner. While it seeks to reconcile green ambitions with competitiveness, the decision introduces deep uncertainty over Europe’s ability to maintain leadership in global ESG standards. As the legislative process advances, the tension between short-term economic relief and long-term environmental accountability will shape the future of Europe’s sustainability governance.

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