The EU institutions have now concluded the first “Sustainability Omnibus” legislative package (“Omnibus I”) amending the Corporate Sustainability Reporting Directive (“CSRD”) and the Corporate Sustainability Due Diligence Directive (“CSDDD”). The European Parliament approved the compromise text on December 16, 2025, following the Council–Parliament agreement reached in early December.
As we flagged in our earlier alerts (EU Sustainability Developments Unpacked: European Parliament Confirms Moderated Position on Corporate Due Diligence and Reporting Rules, EU Sustainability Reporting Unpacked: Latest Developments on the Omnibus Package and ISSB Interoperability, Current developments in ESG obligations in the EU: Omnibus Regulation and EU Deforestation Regulation, and Shifting Sands of EU ESG Reporting Compliance), the direction of travel has been consistent: fewer companies in scope, later and lighter obligations, and explicit “anti-trickle-down” protections for smaller value-chain counterparties—combined with targeted procedural changes intended to make compliance more operationally feasible for those that remain in scope.
Below we highlight the main takeaways from the final deal and what to do next.
The political headline is a deliberate narrowing of mandatory requirements to the largest companies:
This is not simply “stop-the-clock” timing relief; it is a structural shift in who is regulated and how EU sustainability obligations are expected to cascade through groups and value chains.
A. New EU scope thresholds
CSRD sustainability reporting is now required only for EU companies (and certain issuers/groups) meeting both thresholds: (i) >1,000 employees (down from the 1,750 proposed by EU Parliament in its negotiating position) and (ii) >€450 million net turnover.
This is a significant departure from the prior “two-out-of-three” test (employees/turnover/balance sheet) and will remove many “high-turnover, low-headcount” businesses from mandatory CSRD reporting.
B. Non-EU (“Article 40a”) reporting: higher EU turnover + higher EU presence thresholds
For third-country groups, the agreed approach is also more restrictive: the trigger is >€450 million net turnover generated in the EU (for each of the last two consecutive financial years) and an EU subsidiary or branch with >€200 million net turnover.
C. Exemption of financial holding companies and large stock-listed subsidiaries
Financial holding companies, i.e., companies that are not involved in the management of their subsidiary companies, will be exempt from CSRD reporting obligations.
In addition, while subsidiaries that were included in the consolidated CSRD reports of their parent companies could generally opt out of CSRD reporting, this exemption did not apply to large subsidiaries that were listed on an EEA-regulated market. This “counter-exception” has now been deleted, meaning that large stock-listed subsidiaries are exempt from CSRD reporting if they are included in their parent’s consolidated CSRD reports.
D. “Wave one” transition relief for companies dropping out of scope
Member States may introduce a transition exemption for companies that started reporting from FY2024 (the “wave one” cohort) that will fall out of scope under the new thresholds—addressing a key edge case where companies could otherwise face a short reporting “sprint” followed by an exit.
The details will still need careful tracking at Member State level, including any optional exemptions and how national laws handle potential transitions.
One of the most consequential operational changes is the creation of a statutory “value-chain cap” protecting companies in the reporting entity’s value chain with up to 1,000 employees (“protected undertakings”) from disproportionate ESG information requests.
Key elements of the final mechanism include:
This is the EU putting real “teeth” behind the policy objective of preventing sustainability reporting from becoming a backdoor regulation of smaller suppliers and business partners.
Two points from the final Omnibus I are particularly important for reporting strategy:
A. Sector-specific ESRS: no longer mandated
Omnibus I removes the Commission’s empowerment to adopt mandatory sector-specific European Sustainability Reporting Standards (“ESRS”), in order to avoid increasing the number of required datapoints.
B. Core ESRS revision: substantial reform promised
Omnibus I anticipates a fast-track revision of the existing ESRS, focusing on (among other things) removing less important datapoints, prioritizing quantitative datapoints, clarifying the materiality principle, and improving coherence with other EU regimes.
For companies remaining in scope, this reinforces a practical message: build a reporting system that is robust but modular, because the datapoint architecture is likely to change.
Two assurance changes in Omnibus are notable:
This should reduce near-term assurance escalation risk and gives companies more runway to stabilize governance and controls before assurance expectations harden.
Omnibus I introduces a new “digital support” chapter requiring the Commission to provide a dedicated portal for sustainability reporting, giving access to information, guidance, templates, and support for both mandatory and voluntary reporting.
While this is not a compliance obligation in itself, it is a signal that the EU expects the “new normal” to include standardized digital tooling and interoperability, rather than bespoke, manual reporting exercises.
A. New thresholds and timing
The revised CSDDD applies only to companies with >5,000 employees and >€1.5 billion net turnover, with compliance applying from July 26, 2029 (and transposition into Member State law by July 26, 2028).
B. Risk-based due diligence anchored in a “scoping exercise”
The final text explicitly builds due diligence around a scoping approach:
C. Prioritization and information requests (including “smaller partner” protections)
Omnibus I contains multiple controls designed to limit burdens on smaller business partners:
These are practical levers that—if used thoughtfully—should make due diligence programs more targeted and defensible.
A major political compromise is that the obligation to adopt a climate transition plan under the CSDDD is removed.
This does not eliminate climate expectations elsewhere (including through investor pressure, financing conditions, and sectoral requirements), but it does remove one of the CSDDD’s most debated “boardroom-facing” elements. In addition, obligations to report on climate transition plans under CSRD will remain in force.
Two final-agreement points are particularly relevant for litigation risk and enforcement exposure:
In short: liability remains, but it is more clearly channeled through national frameworks, and the EU has stepped back from certain harmonizing moves.
Even with narrower scope, the practical message for many multinational groups is not “stand down,” but “re-calibrate.”
Step 1: Re-run scoping based on the final thresholds
Step 2: If in scope, shift to “lean but audit-ready” data and controls
Step 3: Use the new “anti-trickle-down” rules to reset supplier engagement
Step 4: For CSDDD in-scope companies, design around scoping + prioritization
Step 5: Monitor “what’s next”
The final Omnibus I text marks a decisive EU shift from broad-based sustainability regulation toward a concentrated model aimed at the largest companies, while trying to preserve policy objectives through risk-based due diligence, simplified reporting, and explicit protections for smaller value-chain counterparties.