What softened EU sustainability reporting requirements mean for businesses

Proposed amendments to CSRD reflect a more sustainable approach to sustainability

February 27, 2025

Key takeaways

Eased sustainability reporting requirements would reduce the compliance burden on many businesses.

Companies still in-scope can use potential extended timelines to refine sustainability reporting strategies.

Voluntary reporting remains a viable pathway to ESG leadership and investor confidence.

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ESG

The European Union is making a significant course correction in its sustainability reporting framework, acknowledging the need for a more pragmatic and business-friendly approach. Recent proposed amendments to the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD) and EU Taxonomy Regulation reflect a broader recalibration of regulatory expectations, easing compliance burdens while maintaining core sustainability objectives.

While the EU has proposed adjusted key compliance thresholds and deadlines, the general alignment to the Green Deal objectives remains intact, ensuring that sustainability transparency and corporate due diligence obligations continue to align with this objective.

For global companies—including those in Canada and the U.S.—these proposed changes, if passed, may offer a reprieve, reducing complexity and providing additional time to adapt. As the EU finalizes these revisions, Canadian and American businesses should stay ahead by assessing whether they would remain in scope, leveraging voluntary sustainability reporting and optimizing compliance strategies.

Key changes to sustainability reporting requirements: A move toward practicality

The amendments proposed in February 2025 introduce delays, scope reductions, and flexibility in compliance measures. The proposed djustments respond to growing concerns about administrative burdens, reporting complexity, competitiveness concerns and potential unintended consequences for businesses in the EU and beyond. What do these changes mean for U.S. and Canadian companies that have operations in the EU?

Higher thresholds and extended timelines

  • The CSRD now only applies to large undertakings with more than 1000 employees and either a turnover above 50 million euros or a balance sheet above 25 million euros. (Previously defined as companies with above two out of the following three criteria: 250 employees, 50-million-euro turnover or 25-million-euro balance sheet total)
  • U.S. and Canadian businesses with large undertakings in the EU with less than 1000 employees are no longer required to report against the CSRD.
  • EU entities of U.S. and Canadian companies that are still required to report are given proposed postponement of two additional years to prepare.
  • For global reporting, the threshold for non-EU companies has been raised from having generated revenue in the EU of 150 million euros to 450 million euros and having a large undertaking with the new proposed criteria or a branch with a newly proposed adjusted net turnover of 50 million euros from the current 40 million euros.

These changes would significantly reduce the number of companies required to comply, alleviating concerns for midsized U.S. and Canadian businesses and providing breathing room for those still in scope.

Reduced reporting and assurance obligations

  • The transition to reasonable assurance audits are expected to be scrapped, ensuring that companies will need only limited assurance on sustainability reports.
  • The proposal is expected to provide clarity with proposed targeted guidance regarding audit standards. 

The proposal provides businesses with greater flexibility in how they meet compliance obligations while still maintaining transparency.

Lower compliance burdens for global firms

  • The requirement for the EU Commission to develop sector-specific sustainability reporting standards are removed.
  • Due diligence obligations for CSDDD are now focused on direct suppliers only, rather than the entire value chain, reducing the regulatory trickle-down effect.
  • Liability risks are eased, with the removal of mandatory business relationship termination for non-compliance.

These refinements reflect an EU effort to strike a balance between ambition and feasibility, ensuring that sustainability standards remain effective without imposing excessive burdens on companies, particularly those headquartered outside of Europe.

Implications for Canadian and U.S. companies

For Canadian and American businesses operating in Europe, the recalibrated CSRD and CSDDD frameworks offer several strategic advantages:

  • Fewer companies are in scope: Decreasing the number of companies that will need to report.
  • Lower compliance costs: Reporting and assurance obligations are reduced.
  • More preparation time: Extended deadlines provide additional runway to adapt.
  • Reduced risk exposure: Loosened liability provisions lessen the stakes for non-compliance.

However, large Canadian and American firms will still need to comply. These companies should leverage the extended timeline to refine sustainability strategies, streamline data collection and establish internal assurance processes that align with evolving EU expectations.

A pragmatic shift without abandoning sustainability goals

Despite these adjustments, the EU has stated it remains committed to sustainability and corporate accountability. Rather than rolling back its Green Deal ambitions, the bloc is recognizing that effective regulation must balance ambition with practicality.

The revised CSRD and CSDDD frameworks reflect a more flexible, business-aligned approach that ensures sustainability remains a central corporate priority—without stifling economic competitiveness.

As the EU finalizes these revisions, Canadian and U.S. businesses should stay ahead by:

  • Assessing their EU footprint to determine if they remain in scope.
  • Leveraging voluntary reporting to maintain ESG leadership and investor confidence.
  • Optimizing compliance strategies using the additional time granted.

The EU’s recalibration signals a new era of pragmatism in sustainability regulation—one that businesses should view not as a retreat, but as an opportunity to build smarter, more efficient ESG reporting frameworks that align with both regulatory and market expectations.

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