After months of uncertainty and stalled implementation, the EU closed 2025 with long-awaited clarity on its sustainability rulebook. In December, the European Parliament and the Council of the European Union reached agreement on amendments to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), ending a period of regulatory limbo that had left many corporate initiatives on hold.

A Framework Recalibrated

Since the adoption of the Corporate Sustainability Reporting Directive in December 2022 and the release of the European Sustainability Reporting Standards in July 2023, companies across Europe have been preparing for expanded disclosure obligations. The adoption of the Corporate Sustainability Due Diligence Directive in May 2024 further deepened expectations around value-chain responsibility.

However, 2025 introduced a series of adjustments. February saw the release of Sustainability Omnibus I, followed by the “stop-the-clock” Directive in April, deferring reporting for Wave 2 and 3 entities. In July, “quick fix” amendments to ESRS offered relief to Wave 1 companies. By December, technical advice on ESRS simplification had been delivered, and political agreement on broader CSRD and CSDDD amendments was secured.

Under the revised CSRD thresholds, only companies with more than 1,000 employees and over €450 million in net turnover will remain in scope. Certain financial holding undertakings may be exempt, and Member States can relieve Wave 1 entities that began reporting in 2025 for FY2024 but now fall outside the revised perimeter. The amended rules are expected to apply from January 2027, following publication in the Official Journal.

For CSDDD, thresholds have increased to more than 5,000 employees and €1.5 billion in net turnover, with implementation postponed to mid-2029. Notably, the requirement to adopt and implement a climate transition plan has been removed. At the same time, review clauses built into both directives leave open the possibility that obligations could tighten again in the future.

Relief Today, Uncertainty Tomorrow

The recalibration reduces the immediate compliance burden for many companies. Reporting depth and due diligence expectations have been scaled back at a time when businesses face mounting cost pressures and geopolitical uncertainty.

Yet the underlying drivers of sustainability strategy remain unchanged. Physical climate risks, transition risks, investor scrutiny, and growing expectations from customers and value-chain partners continue to shape corporate decision-making. Even where regulatory obligations ease, market dynamics still demand transparency, resilience, and credible long-term planning.

The result is a more complex strategic landscape. Companies must decide whether to align sustainability efforts narrowly with revised minimum requirements, or to maintain broader ambitions that anticipate future regulatory tightening and evolving stakeholder expectations.

From Compliance to Competitiveness

The EU’s reset reflects a broader global trend: sustainability regulation is evolving, not disappearing. Disclosure frameworks and due diligence standards are being recalibrated across jurisdictions, influencing risk management, capital allocation, and corporate reputation.

For in-scope companies, the immediate task is operational: reconfirm entity perimeter, reporting timelines, and implementation roadmaps. But the strategic challenge is larger. Organizations that treat sustainability solely as a compliance exercise may reduce short-term costs but risk weakening long-term competitiveness.

In contrast, companies that integrate sustainability into core strategy (aligning risk management, investment planning, and stakeholder engagement) are likely to remain more resilient amid accelerating environmental and social pressures.

The EU’s 2026 changes provide clarity after a turbulent year. Whether that clarity becomes a pause in ambition or a pivot toward more strategic sustainability leadership will depend not on regulators alone, but on corporate choices made today.

References

Weidacher, R. (2026, January 23). EU Sustainability Rules Reset: What the 2026 Changes Mean. Retrieved from ISS-Corporate: https://www.iss-corporate.com/resources/blog/eu-sustainability-rules-reset-what-the-2026-changes-mean/

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