EU: Simplified Sustainability Reporting and Due Diligence Requirements Published in Official Journal
A directive simplifying the EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) was published in the Official Journal of the European Union on February 26, 2026, and will come into force on March 18.
The new legislation narrows the scope of the CSRD by raising its thresholds to companies with more than 1,000 employees and above €450 million net annual turnover. Regarding third-country undertakings, the updated requirements will apply only to companies with a net turnover above €450 million for the parent undertaking within the EU and above €200 million generated turnover for the subsidiary or branch. The amending directive also provides for a transition exemption for companies that had to start reporting from financial year 2024 (the so-called “wave one” companies) falling out of scope for 2025 and 2026. It also includes an exemption for certain EU and non-EU financial holding companies from consolidated reporting.
As for the CSDDD, the new legislation narrows its scope by raising its thresholds to companies with more than 5,000 employees and above €1.5 billion net turnover. On the identification and assessment of adverse impacts, companies can focus on the areas of their chains of activities where actual and potential adverse impacts are most likely to occur. The obligation for companies to adopt a transition plan for climate change mitigation under the CSDD has also been removed. Regarding penalties, businesses in breach of the rules will be liable at a national level, with a maximum cap of 3% of the company’s net worldwide turnover. The new legislation also postpones the CSDDD’s deadline for transposition by member states into national law by another year, to July 26, 2028. Companies will have to comply with the new measures by July 2029.
EU: Greenwashing Ban to Apply From September 2026
EU member states are required to transpose the EU’s Directive on Empowering Consumers for the Green Transition into national law by March 27, 2026, with the provisions of the directive applying from September 27. Among other provisions, the directive bans the use of generic environmental claims such as “environmentally friendly,” “ecological,” “climate friendly” and “green,” unless recognized excellent environmental performance can be demonstrated. It also prohibits displaying sustainability labels that are not established by public authorities or based on a third-party verification scheme with specified requirements. For further guidance about the requirements of the directive, see this FAQ document published by the European Commission.