EU Revises CSR Legislation, Balancing Accountability with Competitiveness Goals

The European Union is undertaking a substantial recalibration of its Corporate Social Responsibility (CSR) legislation, a framework initially enacted in 2024. The European Parliament is targeting an agreement on this legislative review by the close of 2025, focusing on adjusting the scope and stringency of requirements for large corporations. The original mandate required companies exceeding 1,000 employees and €450 million in revenue to actively prevent and rectify human rights infringements and environmental degradation across their global value chains, extending oversight to all suppliers.

This ongoing revision is driven by a critical tension between maintaining regulatory ambition and addressing perceived competitive pressures in the global market. Business groups and several member states have advocated for relief, citing heightened competition from Chinese market activities and tariffs imposed by the United States as factors that could impede industrial competitiveness under the existing framework. In response, the European Commission introduced an Omnibus Simplification Package in February 2025, aiming to make sustainability compliance more proportionate and manageable.

Key proposals under consideration involve significantly raising the employee threshold for affected companies to over 5,000 employees, alongside an increase in the revenue threshold to more than €1.5 billion annually for the Corporate Sustainability Due Diligence Directive (CSDDD). Furthermore, there is a push to remove the European civil liability regime, deferring such responsibility matters entirely to individual national legislation. Advocacy groups have expressed concern over this potential shift.

The political process has involved the European Parliament, environmental organizations, and major corporations like ExxonMobil. Environmental advocates maintain that these modifications risk diluting the legislation's core substance, thereby undermining advancements in global human rights and environmental protection standards. ExxonMobil has voiced specific reservations regarding the legislation’s potential adverse effects on its European operations, suggesting alterations are necessary to sustain its market presence. The debate reflects significant political divergence, particularly between right-wing and social democrat groups, regarding the future of EU sustainability enforcement.

External geopolitical factors are intensifying the review. Warnings, such as those from Qatar's Energy Minister, have suggested the original law could disrupt the supply of Liquefied Natural Gas (LNG) to Europe, underscoring the tangible economic stakes. The European Parliament’s Legal Affairs Committee (JURI) has already voted on proposed reductions; reports indicate that raising the CSRD threshold from 250 to 1,000 employees could exempt approximately 80% of businesses from mandatory reporting, with some analyses suggesting the CSDDD changes alone could cut adhering companies by 70%.

The outcome of these high-stakes discussions, scheduled for final negotiation trilogues between the Parliament, Commission, and Council through November and December, will shape the regulatory landscape for corporate accountability. The core question remains whether these adjustments will ease compliance constraints on European entities while preserving necessary protections for human rights and the environment. The Commission anticipates the simplification proposals will yield annual administrative cost savings for companies of approximately €6.4 billion, representing a significant pivot from the initial scope intended to enforce global supply chain accountability.