During the first quarter of 2026, the European Parliament and the Council adopted the revised Corporate Sustainability Reporting and Corporate Sustainability Due Diligence Directive – Directive (EU) 2026/470, amending primarily the Corporate Sustainability Due Diligence Directive which was adopted in 2024. The goal of the stated revisions is to simplify the provisions of the Directive for relevant companies, as well as to give EU Member-States more time to adequately prepare for the stated revisions.
The most significant change to the Directive is the scope of companies being affected by it. Namely, companies now subject to the Directive include:
- Companies that had more than 5 000 employees on average and had a net worldwide turnover of more than EUR 1 500 000 000 in the last financial year;
- Parent companies in franchising or licensing agreements for royalties with other companies, where the stated royalties amount to more than EUR 75 000 000 in the last financial year, and where the other companies had a net worldwide turnover of more than EUR 275 000 000 in the last financial year, as well as;
- Third country companies that had a net turnover of more than EUR 1 500 000 000 in the Union in the financial year preceding the last financial year.
As well as with the previous Directive, the rules set with the new Directive aim to introduce a minimum threshold regarding human rights and environmental due diligence obligations that are to be introduced in all Member States.
Primary changes introduced with the new Directive are related to the due diligence procedure. Namely, companies are now allowed to, as the first step in the DD-procedure, carry out a scoping exercise, based solely on available information to determine the most risky areas, on the basis of which they are to carry out an in-depth assessment of areas most likely to be affected. The in-depth assessment is further simplified with the rule that companies can request information for business partners only where necessary, and if the business partner has fewer than 5 000 employees, only if there is no other way to obtain the necessary information.
A new possibility has been introduced for companies whose business partners are in danger of, or have caused adverse impacts: instead of forcing companies to terminate the relationship with the infringing entity as a last-resort measure, companies are now allowed to temporarily suspend the relationship with the injuring party concerning the relevant activities.
Other relevant changes include:
- The extension of the minimum time between periodic assessments to be carried out by companies to five years;
- The removal of the requirement for the introduction of the Transition plan for climate change mitigation;
- Reduction of maximum limit of fines, from 5 % to 3 % of the net worldwide / net consolidated turnover of the company for the last financial year, as well as;
- The specific civil liability regime at the European Union level was removed, with civil liability for damages now being primarily governed by national law.
Lastly, the new rules are to be transposed into national legal systems by the 26th of July 2028, with companies being required to follow them from the 26th of July 2029 onward.
Prepared by,
Daniel Vujacic