TITLE: European Union Amends Corporate Sustainability Reporting and Due Diligence Requirements to Reduce Regulatory Burden
BODY:
On 26 February 2026, the European Parliament and Council adopted Directive (EU) 2026/470, which amends four key directives governing corporate sustainability reporting and due diligence obligations across the European Union.
The directive substantially narrows the scope of mandatory sustainability reporting requirements. The net turnover threshold for undertakings subject to individual sustainability reporting has been raised from EUR 150 million to EUR 450 million, with an additional requirement of more than 1,000 employees on average during the financial year. This change significantly reduces the number of companies required to comply with mandatory sustainability reporting under Directive 2013/34/EU. Small and medium-sized undertakings whose securities are admitted to trading on regulated markets are now excluded from mandatory reporting, though they remain free to report voluntarily using simplified standards.
The directive also substantially increases thresholds under the Corporate Sustainability Due Diligence Directive (EU) 2024/1760. The turnover threshold rises from EUR 450 million to EUR 1.5 billion, and the employee threshold increases from 1,000 to 5,000 employees. Corresponding thresholds for franchising and licensing arrangements have been adjusted proportionally.
Key modifications include: postponing the adoption of limited assurance standards for sustainability reporting to 1 July 2027; introducing simplified registration conditions for third-country auditors during a transitional period through 31 December 2030; establishing protections for smaller undertakings in value chains by capping information requests; introducing voluntary sustainability reporting standards for small undertakings; and repealing provisions requiring companies to develop climate transition plans.
The directive extends the application deadline for the Corporate Sustainability Due Diligence Directive to 26 July 2029, providing companies additional time to implement requirements. Member States must transpose Articles 1, 2, and 3 by 19 March 2027, and Article 4 by 26 July 2028.
**References:**
Directive (EU) 2026/470 of the European Parliament and of the Council of 24 February 2026, Official Journal of the European Union, L 2026/470, 26.2.2026