EU Scales Back Corporate Sustainability Rules Following Industry Pressure FEB 24, 2026

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EU Scales Back Corporate Sustainability Rules Following Industry Pressure

The European Union has approved significant revisions to its corporate sustainability framework, narrowing the scope of two flagship environmental and social governance directives and extending compliance deadlines after sustained pressure from industry groups and several governments.

The move reflects a broader effort within the EU to balance environmental ambition with economic competitiveness. However, it has raised concerns among environmental organizations, ESG-focused investors, and governance experts who warn that the changes could weaken corporate accountability and transparency regarding environmental and human rights impacts across global supply chains.

Due Diligence Rules Now Limited to the Largest Corporations

One of the most consequential adjustments affects the Corporate Sustainability Due Diligence Directive (CSDDD), legislation designed to require large companies to identify, prevent, and mitigate adverse human rights and environmental impacts linked to their operations and supply chains.

Under the revised framework, only companies with more than 5,000 employees and an annual turnover exceeding €1.5 billion will be fully subject to due diligence obligations. Non-EU companies generating equivalent business volumes within the bloc will also fall under the rules.

This marks a significant narrowing compared to earlier proposals, which sought to include a broader range of European companies and impose more extensive oversight of environmental and social risks across supply chains.

Extended Deadlines and Removal of Climate Transition Plans

In addition to limiting the directive’s scope, EU member states agreed to extend the compliance deadline for affected companies to mid-2029 — a two-year delay from previous timelines.

Another notable change is the removal of the requirement for companies to submit detailed climate transition plans aligned with the Paris Agreement goals. Environmental advocates had viewed mandatory transition planning as a key step toward ensuring corporate decarbonization commitments were measurable and enforceable.

Critics argue that eliminating this requirement may reduce pressure on corporations to align long-term strategies with science-based climate targets.

Sustainability Reporting Also Reduced

The Corporate Sustainability Reporting Directive (CSRD), which mandates environmental, social, and governance disclosures, has also been scaled back. Reporting requirements will now apply only to companies with more than 1,000 employees and turnover above €450 million — excluding thousands of medium-sized companies previously expected to report.

Supporters of the revision say the change will reduce administrative burdens and compliance costs for mid-sized businesses. However, sustainability analysts caution that narrowing disclosure obligations may significantly limit the availability of reliable ESG data for investors and the public.

Competitiveness vs. Climate Leadership

European officials have framed the revisions as part of a broader regulatory simplification effort intended to strengthen the EU’s economic competitiveness in a challenging global landscape.

Yet observers note that the decision illustrates an ongoing tension in global sustainability governance: how to reconcile ambitious environmental and human rights standards with economic and geopolitical realities.

For climate and ESG advocates, the shift raises questions about whether the EU — long positioned as a global leader in sustainable regulation — is recalibrating its approach in response to industrial and political pressures.

As implementation unfolds, the long-term impact of these revisions on corporate accountability, supply chain transparency, and Europe’s climate leadership will likely shape the next phase of sustainable finance and governance across the bloc.

The Green Amazon News – International

This text was compiled using public data, scientific reports, and information from meteorological institutions.

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