Environmental, social and governance | UK Regulatory Outlook June 2025

Council agrees position on simplifying CSRD and CSDDD

As previously reported, under Omnibus Package I the European Commission introduced a proposal to amend the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). It aims to reduce reporting burden and simplify corporate reporting for companies.  

The Council of the EU has now agreed its negotiating mandate on the proposal which is as follows:

CSRD

Scope reduction: Under the Commission's proposal, 80% of companies will be removed from the scope of CSRD, concentrating reporting obligations on the largest companies. This will be done through increasing the employee threshold to 1,000 employees and removing listed SMEs from the scope. Furthermore, the Council propose to introduce a net turnover threshold exceeding €450 million to further reduce the reporting burden on businesses. It has also included a review clause regarding a possible extension of the scope to ensure adequate availability of corporate sustainability information.

CSDDD

Scope reduction: The Council's position raises the thresholds to 5,000 employees and €1.5 billion in net turnover.

Identification and assessment of actual and potential adverse impacts:  

• The Commission’s proposal limits due diligence requirements to a company's own operations, subsidiaries, and direct business partners (tier 1). The Council's mandate shifts the focus to a risk-based approach, targeting areas with the most likely adverse impacts. Companies should no longer required to perform comprehensive mapping but should conduct a general scoping exercise. The Council maintains the limitation to tier 1 to reduce burdens, with companies using reasonably available information.
• The Council’s mandate extends identification and assessment obligations if there is objective and verifiable information suggesting adverse impacts beyond direct business partners. Additionally, it includes a review clause for potentially extending these obligations beyond tier 1.

Civil liability adjustments: The EU harmonised liability regime was removed in the Commission's proposal and the Council's position maintains this.  

Transition plans: Under the Commission's proposal, it simplified the provision on requiring implantation of transition plans to just outline implementing actions (planned and taken). In its mandate, the Council has limited the obligation for companies to adopt a transition plan for climate change mitigation and has given supervisory authorities the power to advise companies on designing and implementing these plans. Additionally the Council has postponed the requirement to adopt transition plans by two years.

Extended compliance preparation: The Council's mandates also postpones the application of the CSDDD by one year to 26 July 2028, with guidelines adoption advanced to July 2026, as set out in the Commission's proposal.  

The European Parliament still needs to reach its negotiating position and once it has done so, the two bodies can start negotiations to reach an agreement on the final text. 

Simplification to EU CBAM 

On 18 June, the European Parliament and Council reached a provisional agreement on the Commission's proposal to simplify the EU carbon border adjustment mechanism (CBAM) as part of the first Omnibus simplification package. 

A key change is the introduction of a new de minimis mass threshold of 50 tonnes, which will exempt 90% of importers, primarily small and medium-sized enterprises and individuals, from CBAM rules. 

The changes also streamline the authorisation process for declarants, the calculation of emissions, and the management of CBAM financial liability, while strengthening anti-abuse provisions. 

Formal adoption of the proposal is expected by the end of September 2025.  

EU Ombudsman investigating Commission's preparation of Omnibus I package  

The EU ombudsman is conducting an inquiry into the European Commission following receipt of a complaint brought by eight civil society organisations. The complaint concerns the Commission's preparation of the Omnibus I package, which amends the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The organisations argue that the Commission did not comply with the "Better Regulation Guidelines". 

The Ombudsman notes that this is the third complaint it has received recently regarding the Commission's adherence to these guidelines. Consequently, it has decided to open an inquiry into the matter.  

For an overview of the changes to key sustainability law under the EU Omnibus I, watch our latest Eating Compliance for Breakfast webinar. 

European Commission to withdraw the Green Claims Directive

It has been reported that the European Commission has this month told the press that it intends to withdraw the Green Claims Directive. The proposed rules would obligate companies to provide verified evidence to green claims they made. However, in line with the trend of simplifying rules for businesses and its simplification agenda, the directive is set to be axed. 

Please also see our latest international ESG Knowledge Update, for a round-up of legal, regulatory and market news.