The European Council representing member states said its negotiators reached an overnight deal with European Parliament representatives to "simplify" two pieces of legislation hailed by civil society groups but loathed by firms.

"We delivered on our promise to remove burdens and rules and boost EU's competitiveness," said Marie Bjerre, the Minister for European affairs of Denmark, which holds the European Union's rotating presidency.

"This is an important step towards our common goal to create a more favourable business environment to help our companies grow and innovate."

The deal comes as concerns about sluggish European growth have shifted the bloc's focus to competitiveness and away from the climate and environment goals of EU chief Ursula von der Leyen's first term -- to the alarm of green advocates.

This has resulted in a broader business-friendly drive to slash EU red tape, paring back a slew of laws on which the ink is barely dry.

The first text parliament and government representatives agreed to ease Tuesday is the Corporate Sustainability Reporting Directive (CSRD), which requires large firms to give investors and other "stakeholders" information on their climate impacts and emissions, and steps taken to limit them.

The second is the Corporate Sustainability Due Diligence Directive (CSDDD), which demands that large companies fix the "adverse human rights and environmental impacts" of their supply chains worldwide.

The deal limits CSRD's scope to companies with more than 1,000 employees and a net turnover of at least 450 million euros ($524 million), while the CSDDD will apply only to firms with more than 5,000 employees and 1.5 billion euros in turnover.

It further pushes back an already delayed deadline for companies to comply with the CSDDD by one year to July 2029, and completely removes the obligation for companies to adopt a transition plan for climate change mitigation.

The agreement also does away with the European civil liability regime, which served to harmonise firms' obligations in the event of breaches, referring to national legislation instead.

German Green lawmaker Anna Cavazzini criticised the changes accusing conservatives in parliament and member states of having "hammered the final nail in the coffin" of the law seeking to clean up corporate supply chains.

The CSDDD was proposed by the commission in 2022 after a parliamentary push inspired by the 2013 collapse of the Rana Plaza garment factory building in Bangladesh, which left at least 1,134 people dead.

Its approval in 2024 was hailed as historic and celebrated as a landmark in the fight to preserve the planet and better working conditions across the globe.

The deal reached on Tuesday is provisional and needs to be officially endorsed by the council and the parliament before it is formally adopted.