Commission Proposes to Ease Corporate Sustainability Reporting and Due Diligence Requirements

The European Commission has published on 26 February 2026 a proposal for a directive amending Directives 2006/43, 2013/34, 2022/2464 and 2024/1760 concerning certain corporate sustainability reporting and due diligence requirements, as part of its Omnibus Simplification Package.

The explanatory memorandum highlights that business associations have raised concerns about the regulatory burden resulting, inter alia, from due diligence obligations under Directive 2024/1760 (the Corporate Sustainability Due Diligence Directive or CSDDD), especially for companies operating within large and complex value chains. Similar concerns, the memorandum notes, have been voiced by SMEs, as they could face unintended trickle-down effects.

Concerns have also been raised regarding potential increases in liability risks. Although the CSDDD includes proportionality mechanisms aimed at ensuring that companies in scope benefit from reputational and resilience advantages through sustainable value-chain management, the Commission has addressed these concerns. The proposal aims to clarify and simplify the existing framework, reducing compliance costs — both one-off and recurring — and making the directive more business-friendly in the short term.

Key Amendments

Article 4 of the proposed directive contemplates several amendments. These involve expanding the scope of maximum harmonization, making due diligence primarily focused on direct business partners as a general rule and removing the obligation to terminate business relationships as a last resort.

The definition of ‘stakeholder’ is narrowed and the due diligence stages requiring stakeholder engagement are further limited.

The proposal also increases the intervals at which companies must assess the adequacy and effectiveness of their due diligence measures.

Additionally, the Commission proposes to clarify the principles governing pecuniary penalties, remove the ‘minimum cap’ for fines, eliminate certain provisions of the civil liability clause and rules on representative actions, modify the provisions related to implementing climate transition plans, delete the review clause concerning financial services and accelerate the adoption of the first set of general implementing guidelines by the Commission.

Civil Liability

Article 4(12) of the proposal aims to amend Article 29 of the CSDDD in relation to civil liability by deleting paragraph (1), which currently states that a company can be held liable for damage to a natural or legal person if it intentionally or negligently fails to comply with the obligations in Articles 10 and 11 (i.e., obligations to prevent potential adverse impacts and address actual ones), leading to harm to the person’s legal interests protected under national law, where the right, prohibition or obligation in the Annex is designed to protect them.

The Commission Staff Working document accompanying the proposal underscores that the harmonized liability framework under Article 29(1) CSDDD was originally established in response to legal actions taken against companies under national laws for failing to mitigate human rights and environmental violations in their value chains. While the CSDDD introduced constraints on liability— such as the necessity of proving fault and excluding responsibility for harm solely caused by business partners — the proposed removal of this EU-wide framework seeks to defer the regulation of liability conditions, including causality and fault, to national laws.

This shift may lower liability risks for companies operating in Member States with more restrictive regimes than Article 29(1) but could simultaneously heighten risks in jurisdictions with more claimant-favorable provisions, such as strict liability without a fault requirement.

Furthermore, the proposed new legislation amends Article 29 by removing paragraph (3), point (d), which require that Member States ensure conditions for allowing trade unions, NGOs and national human rights institutions to bring actions on behalf of an alleged injured party, in accordance with national civil procedure rules.

The access to justice provision has been designed to ensure that victims, especially those in disadvantaged positions (e.g., distant, facing complex legal issues, lacking expertise), can effectively access justice. The aforementioned document accompanying the proposal highlights that removing this obligation may lessen companies’ exposure to collective claims, reducing litigation risks. However, it could also lead to a more fragmented legal landscape, with individual victims filing separate lawsuits rather than pursuing claims collectively.

The proposal further envisages the deletion of Article 29(7), under which Member States must ensure that the provisions of national law transposing this Article are of overriding mandatory application in cases where the law applicable to claims to that effect is not the national law of a Member State. However, the Commission Staff Working document notes that this deletion does not prevent Member States from independently deciding to impose mandatory application at the national level.

Finally, Article 4(12) contemplates modifying Article 29(2), (4) and (5). Paragraph (2) stipulates that when a company is held liable under national law for damage caused to a natural or legal person due to non-compliance with the due diligence requirements, Member States must ensure that these persons are entitled to full compensation. Safeguards are introduced to prevent over-compensation, such as prohibiting punitive, multiple or other excessive damages. Then, the revision of paragraph (4) establishes that companies involved in industry or multi-stakeholder initiatives, or that have used independent third-party verification or contractual clauses to support due diligence obligations, can still be held liable under national law. Lastly, the modification of paragraph (5) clarifies that the civil liability of a company for damages as referred to in this Article shall be without prejudice to the civil liability of its subsidiaries or of any direct and indirect business partners in the chain of activities of the company.