EU Sustainability Reporting Directive 2026/470 Narrows CSRD Scope and Eases Corporate Due Diligence Burdens

Higher Thresholds Redefine EU Sustainability Reporting Scope

One of the most consequential changes under the EU Sustainability Reporting Directive 2026/470 is the reduction in the number of companies subject to mandatory sustainability disclosures.

Under the revised rules, undertakings must publish sustainability information only if they exceed €450 million in net turnover and an average of 1,000 employees during the financial year. The same thresholds apply to parent companies reporting at group level.

The reform removes listed small and medium-sized enterprises (SMEs) from the mandatory reporting regime and focuses the CSRD framework on the largest organisations whose environmental, social and governance (ESG) impacts are considered most significant.

For professionals across the chemicals value chain, this shift could reduce direct reporting obligations for many mid-sized producers, specialty chemical companies and distributors. However, supply-chain transparency demands from large reporting entities are likely to persist.

New Protections for SMEs in Corporate Value Chains

The directive introduces a “value-chain cap” designed to protect smaller suppliers from excessive ESG information requests.

Companies with fewer than 1,000 employees in a reporting company’s value chain are classified as “protected undertakings”. These firms gain a statutory right to decline sustainability data requests that exceed the simplified voluntary reporting standards that the European Commission will adopt for smaller companies.

Large reporting companies must also clearly identify when requested information goes beyond those voluntary standards and inform suppliers of their right to refuse such requests.

For chemical manufacturers and raw material suppliers, the measure could reduce the administrative burden created by sustainability questionnaires and data requests from major corporate customers.

Changes to ESG Assurance and Reporting Standards

The EU Sustainability Reporting Directive 2026/470 also simplifies the audit and reporting framework associated with sustainability disclosures.

The Commission must adopt limited assurance standards for sustainability reporting by 1 July 2027, allowing additional time for the development of harmonised auditing procedures.

At the same time, the directive removes the requirement to introduce reasonable assurance standards, which would have significantly increased verification costs for companies and auditors.

The directive also eliminates the planned development of sector-specific European Sustainability Reporting Standards (ESRS). Instead, the Commission may issue sector guidance to help companies apply the existing ESRS framework.

Together, these changes aim to streamline ESG reporting requirements while maintaining comparability of sustainability data across the EU.

Corporate Sustainability Due Diligence Thresholds Rise Sharply

The directive also revises the scope of the Corporate Sustainability Due Diligence Directive (CSDDD).

Under the amended rules, due diligence obligations apply only to companies with:

• More than 5,000 employees, and
• Over €1.5 billion in net worldwide turnover.

These significantly higher thresholds narrow the directive’s scope to the largest multinational companies with the greatest influence over global supply chains.

The implementation timeline has also been extended. Member States must apply the new due diligence rules from 26 July 2029, giving companies additional time to develop risk-based human rights and environmental due diligence systems.

Implications for Chemical Sector Stakeholders

The EU Sustainability Reporting Directive 2026/470 reflects a shift towards regulatory simplification and proportionality in EU sustainability legislation.

Large chemical producers, petrochemical companies and multinational materials manufacturers will remain firmly within the scope of mandatory sustainability reporting and due diligence requirements. However, many mid-sized firms may fall outside the revised thresholds.

Despite this narrowing of scope, voluntary reporting standards and supply-chain transparency expectations mean sustainability data collection will likely remain a key operational issue across the chemicals ecosystem.

Businesses should reassess their reporting obligations and ESG governance frameworks ahead of national transposition deadlines in 2027 and 2028.

Companies operating within EU chemical supply chains should evaluate whether they remain within the revised CSRD scope and update internal ESG data systems to align with the new reporting thresholds and value-chain rules.

Summary

EU Sustainability Reporting Directive 2026/470 narrows CSRD reporting obligations to companies with over €450 million turnover and 1,000 employees, raises due diligence thresholds to €1.5 billion turnover and 5,000 employees, and simplifies ESG assurance rules. The reform aims to reduce compliance burdens while maintaining sustainability transparency across EU markets.