The EU Council has given the final green light to a simplification of the sustainability reporting and due diligence requirements for companies, as part of its ‘Omnibus’ red tape cutting package.
The legislation looks to simplify EU directives on corporate sustainability reporting (CSRD) and corporate sustainability due diligence (CS3D) by reducing the reporting burden, says the Commission, and so ‘limiting the trickle-down effect of obligations on smaller companies’.
The Omnibus I simplification package reduces complexity and unnecessary barriers, cuts red tape, enhances efficiency and introduces more flexibility for companies that remain subject to its scope with the aim to boost EU competitiveness, especially in a constantly changing geopolitical framework.
The CSRD’s scope is narrowed by raising its thresholds to companies with more than 1,000 employees and above €450 million net annual turnover. Regarding third-country undertakings, the updated requirements will apply only to companies with a net turnover above €450 million for the parent undertaking within the EU and above €200 million generated turnover for the subsidiary or branch.
The amending directive also provides for a transition exemption for companies that had to start reporting from financial year 2024 (the so-called ‘wave one’ companies) falling out of scope for 2025 and 2026. It also includes an exemption for certain EU and non-EU financial holding companies from consolidated reporting.
Corporate sustainability due diligence directive
The CS3D’s scope is narrowed by raising its thresholds to companies with more than 5,000 employees and above €1.5 billion net turnover, considering that such large companies have the biggest influence on their value chain and are best equipped to make a positive impact and absorb the costs and burdens of due diligence processes.
On the identification and assessment of adverse impacts, companies can focus on the areas of their chains of activities where actual and potential adverse impacts are most likely to occur. To provide companies with flexibility, when a company has identified adverse impacts equally likely or equally severe in several areas, this company is given the ability to prioritise assessing adverse impacts which involve direct business partners. Companies are also supposed to base their efforts on reasonably available information, which will reduce the trickle-down effect of information requests on smaller business partners.
To provide for a significant burden relief, the obligation for companies to adopt a transition plan for climate change mitigation under the CS3D has been removed.
The updated rules also remove the EU harmonised liability regime and the requirement for member states to ensure that the liability rules are of overriding mandatory application in cases where the applicable law is not the national law of the member state.
When it comes to penalties, businesses will be liable at a national level for failure to apply the rules correctly. The new directive provides for a maximum cap of 3% of the company’s net worldwide turnover, with the Commission issuing the necessary guidelines in this regard.
Finally, the amending directive postpones the CS3D’s transposition deadline by member states into national law by another year, to 26 July 2028. Companies will have to comply with the new measures by July 2029.
Directive on sustainability reporting and due diligence requirements, 24 February 2026
