Yesterday, on December 9th, 2025, EU deal significantly narrowed and simplified sustainability reporting (CSRD) and due diligence (CSDDD/CS3D), easing the burden for many companies while keeping stringent expectations for the largest groups and their high‑risk value chains.
This creates different risk–opportunity profiles depending on company size, sector, and position in supply chains.
What the deal changes
Social and environmental reporting under CSRD will only be required for EU companies with more than 1,000 employees and at least €450 million in annual net turnover, and for non‑EU companies that generate at least €450 million in turnover within the EU.
Social and environmental reporting under CSRD will only be required for EU companies with more than 1,000 employees and at least €450 million in annual net turnover, and for non‑EU companies that generate at least €450 million in turnover within the EU.
- Corporate sustainability due diligence obligations will only apply to very large companies: EU groups with more than 5,000 employees and €1.5 billion in turnover, and non‑EU companies with comparable EU turnover.
- Reporting becomes more quantitative, sector‑specific standards are largely voluntary, and smaller companies under 1,000 employees may refuse extra ESG data requests beyond the voluntary SME standard.
Large groups (5,000+ employees)
For the largest companies, the rules remain demanding but more focused.
Opportunities:
Lower overall population in scope means clearer benchmarking against a peer set of similar scale, potentially strengthening credibility with investors and regulators.
- A risk‑based due diligence approach lets groups prioritize the parts of the value chain with the highest actual or potential adverse impacts instead of covering every tier mechanically.
- Caps on penalties (3% of global revenues) and removal of an EU‑wide civil liability regime reduce legal uncertainty and extreme downside risk compared with earlier drafts.
- Risks:
- Scrutiny from authorities, NGOs, and financiers will concentrate on these remaining in‑scope multinationals, raising reputational and enforcement exposure.
- Removal of the mandatory climate transition plan under CSDDD reduces prescriptive burden but also removes a structured framework that many investors expected, so companies may need to design credible transition plans anyway to satisfy capital markets.
- Review clauses could broaden scope or re‑introduce stricter liability in future revisions, so treating this as a permanent “roll‑back” would be risky.
Mid‑caps and larger SMEs (approx. 1,000–5,000 employees)
Many mid‑sized and larger SMEs are now out of mandatory scope for CSRD and fully out of scope for CSDDD, unless they grow above the thresholds.
Opportunities:
Direct reporting and due diligence costs are significantly reduced; estimates suggest that roughly 90% of companies previously expected to report under CSRD, and 70% under CSDDD, will now be outside the scope.
- With sector‑specific standards optional, companies that still report can focus on a streamlined core set of metrics aligned to business strategy, rather than broad narrative disclosures.
- Freed‑up resources can be redirected from compliance to targeted sustainability performance improvements (energy efficiency, supply‑chain resilience), supporting competitiveness.
- Risks:
- Key customers that remain in scope will still expect robust ESG data, even if the law formally limits what they can request from smaller partners, so commercial pressure for credible information will persist.
- Falling out of scope may be perceived negatively by some investors and lenders that increasingly expect CSRD‑style disclosures as a market standard.
- Companies close to the thresholds risk “stop‑start” investments if they under‑invest now and later cross the size limits, facing a steep catch‑up to build reporting systems and governance.
Micro and small companies (under ~1,000 employees)
Smaller businesses are the main beneficiaries of the simplification, especially those deep in supply chains.
Opportunities:
Clear protection against excessive data demands: companies under 1,000 employees can refuse requests beyond the voluntary SME sustainability standard, reducing administrative overload.
- A voluntary SME standard and a planned digital portal with templates and guidance should make light‑touch, investor‑ready sustainability reporting easier and cheaper for willing small firms.
- For niche suppliers with strong ESG performance, voluntary transparency can become a differentiator in tenders with large in‑scope customers.
- Risks:
- Some small firms may misread the simplification as a signal that ESG no longer matters, losing ground as banks and large buyers continue to integrate sustainability into credit and procurement decisions.
- Limited internal expertise means that even voluntary reporting, if poorly designed, can create greenwashing exposure or inconsistent messages across customers and markets.
Companies can be guided to treat the deal not as the end of sustainability regulation, but as a re‑calibration: fewer entities in scope, sharper expectations for the largest actors, and more room for small and mid‑sized firms to build lean, business‑driven sustainability strategies instead of purely compliance‑driven reporting.
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