EU’s Omnibus Directive: Key changes to the CSRD and the CS3D now approved

On 16 December 2025, the European Parliament formally reached an agreement on the simplification of the CSRD and the CS3D under the so-called Omnibus I Package. This marks the end of a period of uncertainty following  the adoption of a first draft sustainability “Simplification Omnibus Package” on February 26, 2025 and subsequent trilogue negotiations at European level.

Main changes to the CSRD

Scope

To reduce the sustainability reporting burden on businesses, and to promote closer alignment with the scope of the CS3D, the scope of application of the CSRD (and therefore the obligation to prepare and publish a sustainability statement at individual level) has been reduced to companies with:

For EU companies and non-EU issuers:

• an average of more than 1,000 employees; and
• an annual net turnover of more than 450 million EUR. 

For non-EU parent undertakings or groups:

• an annual net turnover of more than 450 million EUR generated in the EU.

For EU subsidiaries or branches:

• an annual net turnover of more than 200 million EUR.

As a result, SMEs and medium-sized companies have been completely excluded from the scope of the CSRD.

An exemption applies to “financial holding undertakings” whose sole object is to acquire holdings in other undertakings, without being directly or indirectly involved in the management of those undertakings and provided that their subsidiaries operate independently from each other.

Application date

As a result of the adoption of the Belgian law of 12 December 2025, implementing the EU “Stop-the-Clock” Directive, the sustainability reporting obligations have been postponed with two years. Consequently, the new reporting obligations will apply as from 2028 for financial years beginning on or after 1 January 2027. 

As to the companies which are already reporting under the CSRD (the former “Wave 1” companies), the new text introduces a transitional exemption allowing Member States to exempt those Wave 1 companies that do not meet the new CSRD thresholds for the financial years 2025 and 2026. This measure aims to reduce compliance burdens ahead of the revised scope applying to financial years starting on or after 1 January 2027.

Content

Other important changes to the CSRD are amongst others:

• The significant simplification of reporting standards, with less focus on qualitative details;
• The simplification of the ESRS through a Delegated Act to be adopted by the European Commission within 6 months, prioritizing quantitative disclosures and clarifying materiality;
• The streamlining and increased guidance on the conduct of the double materiality assessment;
• The introduction of a Value Chain Cap, whereby smaller companies (with < 1,000 employees in the value chain, referred to as “protected undertakings”) are not obliged to provide to the reporting entity any information that exceeds what is specified under the voluntary ESRS (VSMEs); and
• The removal of sector-specific reporting standards, whereby instead the right is granted to the European Commission to issue non-binding sectoral guidance to assist companies in applying the ESRS; and
• The removal of the requirement for reasonable assurance. Limited assurance remains mandatory, with relevant standards to be adopted by 1 July 2027. 

Main changes to the CS3D

Scope

The scope of the Corporate Sustainability Due Diligence Directive (CS3D) has been drastically reduced to companies with:

For EU companies:

• an average of more than 5,000 employees; and
• an annual net turnover of more than 1.5 billion EUR. 

For non-EU companies:

• an annual net turnover of more than 1.5 billion EUR generated in the EU. 

For EU and non-EU companies that (directly or indirectly) entered into franchising or licensing agreements in the EU with resulting royalties of more than 75 million EUR:

• an annual net turnover of more than 275 million EUR generated in the EU. 

As a result, only the largest players will be subject to due diligence obligations.

Application date

The deadline for transposition of the CS3D has been postponed by one year to 26 July 2028, whereby in-scope companies are required to comply with the new measures by 26 July 2029 (and to publish disclosures required under CS3D by 1 January 2030). The European Commission will issue guidelines by 2027 to ensure clear and harmonised implementation.

Content

Other important changes to the CS3D are amongst others:

• The introduction of a limitation on the scope of the value chain, whereby due diligence applies across the entire “chain of activities”. However, when conducting an in-depth assessment, companies should prioritise research and information-gathering involving direct business partners. Indirect business partners are to be assessed only on a case-by-case basis whenever there is objective evidence of risk or circumvention. To reduce burdens, companies must refrain from requesting unnecessary information from SMEs or entities not in scope of the Omnibus I package;
• The removal of the requirement to adopt and put into effect a climate transition plan;
• The limitation of the obligation to conduct diligence assessments to every 5 years, rather than yearly; 

The elimination of the existing EU-wide liability regime. Instead, a review clause has been introduced to assess, at a later stage, whether a harmonised EU liability regime should be established; and

• The introduction of penalties (to be imposed at national level) for non-compliance to be capped at 3% (rather than a minimum maximum of 5% under the existing CS3D) of the net worldwide turnover of the company concerned.

Conclusion

The impact of this Omnibus I Package should not be underestimated. In practice, the new scope actually reduces the number of entities falling in scope of the CSRD by around 90%, and those falling in scope of the CS3D by around 70%. This leads to a considerable limitation of the reporting burden and limits the trickle-down effect of obligations on smaller companies, including SMEs. The choices made in terms of  liability and enforcement on the other hand may lead to increased fragmentation amongst Member States.