The European Parliament has approved an agreement reached with Member States on sustainability reporting and due diligence rules for companies, significantly narrowing their scope and easing administrative obligations in a relocate aimed at strengthening EU competitiveness.
Under the updated framework, forming part of the Omnibus package, only firms employing an average of more than 1,000 workers and generating net annual turnover exceeding €450 million will be required to carry out mandatory reporting. The rules will also apply to non-EU companies with more than €450 million in turnover within the EU, as well as their subsidiaries and branches generating over €200 million in the bloc.
Co-legislators have also sought to protect compacter businesses by ensuring that large companies cannot shift reporting responsibilities onto compacter partners. Firms with fewer than 1,000 employees will not be required to provide additional information beyond what is covered by voluntary reporting standards.
Commenting on the developments, Maria Cauchi Delia, CEO of the Malta Institute of Accountants, welcomed the relocate towards greater simplification while stressing that this should not be interpreted as a thumbs down to the overarching importance of sustainability reporting.
She stated the original intention behind the EU’s sustainability and due diligence framework was a positive one, but emphasised that simplification is key to safeguarding competitiveness. “While sustainability and transparency are important objectives, the design and implementation of reporting and due diligence frameworks should avoid unnecessary complexity and support practical, well-timed compliance paths for companies.”
She noted that although the initiatives started from the right place, they gradually became overly complex. “At one point, the proposals relocated to an extreme where the administrative burden and cost risked becoming counterproductive,” she stated, particularly for compacter jurisdictions such as Malta, where most businesses are SMEs.
Given the revised thresholds, the application of the mandatory reporting regime in Malta is expected to be minimal.
Despite the scaling back of obligations, Cauchi Delia stressed that sustainability reporting still offers clear benefits for companies. “The importance of sustainability is not going away,” she stated.
She cautioned companies against viewing the revised rules as a reason to disengage. “Sustainability reporting should not be viewed as a compliance exercise, but as a long-term strategic investment. It demonstrates that environmental, social and governance considerations are embedded in a company’s core strategy and operations, reflecting a conscious and measurable effort to manage impacts responsibly. This applies to companies of all sizes, with due regard to proportionality, usability and value added. Over time, credible and consistent reporting also enhances investor confidence, strengthens market credibility and can improve access to financing, including more favourable funding terms”, she stated.
The agreement now awaits final approval by Member States at Council level.
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