EU’s sustainability reporting shake-up: What’s changing and what it means for fashion
The European Commission is moving forward with amendments to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) through its “Simplification Omnibus Package.” A leaked draft has sparked heated debate, revealing major shifts in reporting thresholds, compliance timelines, and due diligence obligations. While some view these changes as necessary simplifications, others argue they weaken corporate accountability.
So what’s (could be) changing? Who’s against it and why? And what are the potential impacts for the fashion industry?
What’s (eventually) changing?
1. Increased reporting thresholds
Among the most critical adjustments is the raising of compliance thresholds. Under the leaked draft, the net turnover requirement for reporting companies would increase from 150 million euros to 450 million euros and 1,000 employees, removing a significant number of U.S. and non-EU companies from the CSRD’s scope (Ropes & Gray, Littenberg et al., 2025). However, for global fashion giants—many of whom exceed these thresholds—the directive remains highly relevant.
2. Value chain reporting adjustments
Another key amendment relates to value chain reporting, which has long been a contentious issue for fashion brands due to their complex global supply chains. The leaked draft suggests reducing the reporting burden by limiting the obligation to obtain data from companies that are not directly subject to CSRD. This could ease compliance for fashion brands that work with small suppliers.
However, strategic sustainability advisor Peter Suasso de Lima de Prado raises concerns over certain restrictions in the amendments. He argues that exempting companies with fewer than 500 employees from risk mapping could be counterproductive. “Size doesn’t determine risk—you should decide where to focus,” he notes, advocating for greater corporate discretion in supply chain oversight. His perspective is especially relevant for fashion brands, as smaller manufacturers often play a crucial role in their supply chains but may still pose significant environmental and human rights risks.
3. The shift in due diligence requirements
The CSDDD amendments aim to refine due diligence obligations, particularly regarding risk assessment. The proposed changes limit companies’ duty to assess actual and potential adverse impacts to their direct business partners (tier 1 suppliers), observes Ropes & Gray. An in-depth evaluation of indirect partners would only be required if plausible risks are identified.
For the fashion industry—where supply chains often extend multiple tiers deep—this shift could reduce compliance burdens. However, some experts caution that it might also weaken accountability. Suasso de Lima de Prado points out that while the amendments intend to make compliance more manageable, they could inadvertently restrict flexibility in addressing risks.
4. Sector-specific standards on hold
Another major proposed change is the extension of the monitoring period from annual reviews to once every five years. While this might seem like a relief for businesses, Suasso de Lima de Prado argues that it misunderstands supply chain dynamics. “Integrating monitoring into existing processes costs less than major periodic exercises,” he explains, suggesting that companies should maintain ongoing assessments rather than rely on infrequent, large-scale audits.
The leaked draft also proposes indefinitely postponing sector-specific reporting standards under CSRD. Initially, these were expected to provide tailored sustainability reporting requirements for industries such as fashion. Given that the sector is one of the most environmentally impactful, this delay may hinder efforts to develop clear, industry-specific guidance on issues like textile waste and carbon emissions.
5. Materiality and assurance: no major overhaul
Despite speculation that the European Commission might scrap double materiality—which requires companies to report on both financial and environmental/social impacts—the leaked draft does not eliminate it. This means fashion companies will still need to disclose not just how sustainability issues affect their bottom line, but also their broader impact on society and the environment.
Regarding assurance, the draft maintains the requirement for limited assurance of sustainability reports. However, it removes the mandate for reasonable assurance standards by 2028, effectively freezing assurance requirements at a lighter level. Companies will still need to provide credible data, but they may face fewer stringent verification procedures.
6. The debate over civil liability and compliance costs
The leaked amendments propose eliminating the requirement for penalties to be tied to 5% of global turnover and removing the private right of action that would allow third parties to sue companies for non-compliance. Suasso de Lima de Prado points out that legal liability remains a gray area, emphasizing that “market reputation (the court of public opinion) often presents greater business risk than court outcomes.” This is particularly relevant for fashion brands, where consumer trust plays a major role in brand value.
Who’s against the changes and why?
Environmental and Human rights advocates
Many sustainability experts and NGOs argue that these amendments dilute corporate accountability. Critics point out that raising reporting thresholds will reduce the number of companies subject to sustainability disclosures, potentially allowing mid-sized firms to operate with less transparency. Similarly, the reduction in due diligence requirements for indirect suppliers may weaken protections against human rights violations and environmental harm in global supply chains.
EU Member States with strong sustainability policies
Countries like France, Germany, and Denmark have historically pushed for stricter corporate sustainability measures. While these nations support simplifying compliance requirements, they also advocate maintaining high environmental and social standards. Some policymakers fear that scaling back reporting obligations and delaying implementation deadlines may hinder progress toward the EU’s climate and human rights goals.
Fashion brands and industry stakeholders
Within the fashion industry, reactions are mixed. Larger brands with extensive sustainability initiatives may be concerned that reduced transparency requirements could lead to accusations of greenwashing. On the other hand, mid-sized companies and smaller suppliers may welcome the reduced reporting burden, as compliance costs have been a significant challenge.
The impact on fashion industry sustainability efforts
The fashion industry is, as one knows, one of the most environmentally impactful sectors, responsible for substantial carbon emissions, water consumption, and labor rights concerns. The CSRD and CSDDD were designed to improve transparency and corporate responsibility in addressing these issues. However, the proposed amendments could change the trajectory of sustainability efforts in the following ways:
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Less transparency in supply chains: With reporting obligations reduced for value chain partners, companies may face less scrutiny over their suppliers’ environmental and labor practices. This could slow efforts to improve conditions in textile production hubs such as Bangladesh, Vietnam, and India.
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Shift from regulation to voluntary commitments: If sector-specific standards are abandoned, fashion brands may increasingly rely on voluntary sustainability initiatives such as the Science-Based Targets Initiative (SBTi) or the Sustainable Apparel Coalition’s Higg Index. While some companies have robust voluntary frameworks, others may reduce their sustainability investments in the absence of regulatory pressure.
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Longer compliance timelines: The delay in CSDDD implementation gives brands more time to adjust their sourcing and due diligence processes. While this may ease short-term compliance costs, it also means slower progress in addressing critical human rights and environmental issues.
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Potential competitive disadvantages: Companies that have already invested heavily in sustainability reporting may find themselves at a disadvantage compared to competitors who benefit from reduced compliance obligations. This could create an uneven playing field within the industry.
Looking ahead
While the final form of these amendments remains uncertain, one thing is clear: the fashion industry must remain vigilant. The shift in reporting thresholds may reduce the regulatory burden for smaller players, but for larger brands, compliance remains a complex challenge. Sustainability experts like Suasso de Lima de Prado stress that despite these changes, the best approach remains aligning due diligence practices with established frameworks like the UN Guiding Principles and OECD Guidelines.
Ultimately, the EU’s sustainability directives are evolving, but their core objectives—enhancing corporate accountability and responsible business practices—remain intact. Whether these adjustments will strike the right balance between simplification and maintaining strong sustainability standards is a debate that will continue to unfold in the coming weeks.
February 25, 2025 at 10:58AM
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news@fashionunited.com (Diane Vanderschelden)