The European Union has introduced two key directives to strengthen corporate sustainability: the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The CSRD mandates comprehensive environmental, social, and governance (ESG) reporting, enhancing transparency and comparability for investors and stakeholders. Meanwhile, the CSDDD requires companies to identify, prevent, and mitigate human rights and environmental risks across their operations and supply chains, promoting ethical business practices.
These directives mark a significant shift in EU corporate governance, reinforcing transparency, accountability, and ethical conduct. By standardising sustainability reporting and enforcing due diligence, they align with the EU’s broader sustainability objectives under the European Green Deal, including human rights protection and environmental conservation.
However, compliance presents challenges, particularly for SMEs with limited resources. The evolving regulatory landscape adds complexity as policymakers seek to balance sustainability ambitions with business feasibility, sparking ongoing debate over maintaining high standards while ensuring competitiveness.
The European Commission’s proposed revisions under the Simplification Omnibus Package have ignited debate over corporate accountability. Key changes include raising the net turnover threshold from €150 million to €450 million and increasing the employee threshold to 1,000. These adjustments exempt many non-EU and U.S. companies, though major fashion brands remain affected.
Businesses outside the CSRD’s direct scope may benefit from reduced reporting obligations, easing compliance for those with complex supply chains. Companies with fewer than 500 employees are now excluded from risk assessments, potentially undermining accountability. Moreover, risk assessments are restricted to tier 1 suppliers, with deeper scrutiny required only if credible risks emerge—potentially limiting oversight.
Sector-specific reporting standards are delayed, postponing guidance on critical issues such as textile waste and carbon emissions. While the double materiality principle remains, assurance requirements have been relaxed, eliminating stricter verification mandates by 2028. Additionally, the removal of penalties linked to five per cent of global turnover and third-party legal claims reduces corporate liability but heightens reputational risks.
The fashion industry, a significant environmental contributor, faces notable impacts. Weaker reporting requirements may reduce scrutiny of environmental and labour practices. If sector-specific standards are scrapped, brands may rely on voluntary initiatives such as the Science-Based Targets Initiative (SBTi) or the Sustainable Apparel Coalition’s Higg Index. While the delayed CSDDD implementation provides companies more time to adapt, it risks slowing progress on urgent human rights and environmental issues. Furthermore, firms that have heavily invested in sustainability could face disadvantages if competitors benefit from reduced obligations.
The CSRD and CSDDD mark a pivotal shift in EU corporate sustainability, strengthening transparency, accountability, and ethical standards. While these directives align businesses with the EU’s sustainability agenda, proposed amendments risk weakening their impact by easing compliance requirements. Reduced oversight, particularly in the fashion industry, could slow progress on critical environmental and human rights issues. As regulations evolve, companies must balance compliance with genuine sustainability efforts to uphold credibility and ensure long-term resilience in an increasingly scrutinised global market.
Vanderschelden, D. (2025, February 27). EU’s Sustainability Reporting Shake-Up: What’s changing and what it means for fashion. FashionUnited. https://fashionunited.uk/news/business/eus-sustainability-reporting-shake-up-whats-changing-and-what-it-means-for-fashion/2025022580325
Johnson, L. (2025, February 27). EU adopts omnibus proposal, trims Sustainability Reporting Requirements. ESG Dive. https://www.esgdive.com/news/eu-omnibus-trims-csrd-csddd-reporting-requirements-timelines/741161/
Wikimedia Foundation. (2025, February 27). Corporate sustainability due diligence directive. Wikipedia. https://en.wikipedia.org/wiki/Corporate_Sustainability_Due_Diligence_Directive
Wikimedia Foundation. (n.d.). Richtlinie (EU) 2022/2464 (CSRD). Wikipedia. https://de.wikipedia.org/wiki/Richtlinie_%28EU%29_2022/2464_%28CSRD%29
