Corporate sustainability: what the EU expects from companies
The EU has rules aimed at making companies more accountable when it comes to their impact on people and the environment.
The EU wants to make sure that companies respect human rights, protect the planet and are open about their actions. To achieve this, it has adopted corporate sustainability rules, laid down in two directives.
The Corporate Sustainability Due Diligence Directive sets out how businesses are expected to operate, while the Corporate Sustainability Reporting Directive stipulates what information businesses must share as part of financial reporting on their social and environmental sustainability.
Some changes were proposed by the European Commission in February 2025 to make the rules easier to implement, especially for smaller companies. The simplification proposal came in response to concerns that the rules may be creating an excessive administrative burden for some businesses.
In December 2025, the European Parliament approved a provisional agreement with EU governments on the updates. The new simplified rules would apply to fewer companies and reduce some obligations.
Corporate Sustainability Due Diligence Directive
The Corporate Sustainability Due Diligence Directive requires firms to actively prevent, end or mitigate negative impacts on human rights and the environment, such as slavery, child labour or biodiversity loss. The directive was approved by the European Parliament in April 2024.
Under the rules revised at the end of 2025, these due diligence obligations will apply to fewer companies. Only very large EU corporations with more than 5,000 employees and a net annual turnover of over €1.5 billion will have to comply. The same turnover threshold will apply to non-EU companies operating in the EU.
The directive emphasises the importance of integrating sustainability into core business strategies.
Those covered by the rules will have to identify the main risks linked to their activities and their value chains.
If companies fail to apply the rules correctly, national authorities could impose fines of up to 3% of their global annual turnover.
The due diligence rules will apply from 26 July 2029.
Corporate Sustainability Reporting Directive
Under the Corporate Sustainability Reporting Directive, large companies are required to provide transparent data and sustainability information as part of their regular financial reporting for investors and consumers to be able to compare their performance.
The rules were updated in 2025 to make it easier, especially for smaller businesses, to comply.
Only EU companies with more than 1,000 employees and a net annual turnover of over €450 million will have to carry out social and environmental reporting. The rules will also apply to non-EU companies with an EU turnover of over €450 million, as well as to their large subsidiaries and branches operating in the EU.
Businesses with fewer than 1,000 employees will not have to supply extra information to larger partners beyond what is included in voluntary reporting standards.
To help companies further, the European Commission is expected to set up a digital portal with templates and practical guidance on reporting requirements.
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