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The EU Council adopted the Omnibus I Directive on 24 February 2026, substantially amending the Corporate Sustainability Due Diligence Directive (CSDDD) and Corporate Sustainability Reporting Directive (CSRD). The amendments reduce company scope thresholds by approximately 70%, eliminate climate transition plan requirements, remove EU-wide civil liability provisions, and delay implementation until July 2029.
The Omnibus I package was first proposed on 26 February 2025 as part of the EU's regulatory simplification agenda. The European Parliament and Council reached provisional agreement on 9 December 2025, with Parliament adoption following on 16 December 2025. These changes come less than two years after the CSDDD was finalised and passed into law on 24 May 2024, following two years of institutional negotiations.
The final text represents a fundamental restructuring of EU sustainability compliance frameworks. For the CSDDD, the scope reduction affects both EU and non-EU companies through dramatically increased thresholds. EU companies must now exceed 5,000 employees and EUR 1.5 billion global net turnover, compared to the previous 1,000 employees and EUR 450 million thresholds. Non-EU companies face increased thresholds from EUR 450 million to EUR 1.5 billion net turnover in the EU.
The CSRD scope changes eliminate "wave 3" companies entirely - publicly listed small and medium-sized enterprises that were required to begin reporting for financial years starting 1 January 2026. Current "wave 1" companies may receive exemptions from reporting obligations for financial years beginning between 1 January 2025 and 31 December 2026.
The amended CSDDD maintains the core obligation requiring Member States to ensure companies conduct risk-based human rights and environmental due diligence. However, the due diligence process has been narrowed significantly. Companies must first conduct a "scoping" exercise based solely on information that "is already reasonably available" rather than comprehensive mapping.
After scoping, companies need only assess the most likely and severe adverse impacts, prioritising impacts associated with direct business partners. Information requests to business partners should occur only where necessary and only as a last resort for partners with fewer than 5,000 employees. All requests must be "targeted, reasonable and proportionate."
The requirement to terminate business relationships as a last resort has been removed entirely. Financial penalties are capped at 3% of net worldwide turnover, reduced from the previous 5% minimum ceiling.
The CSRD will apply to EU companies with over 1,000 employees and over EUR 450 million in net turnover. A new exemption allows EU parent companies and ultimate non-EU parent companies qualifying as "financial holding undertakings" to choose not to publish consolidated sustainability reports where subsidiaries have independent business models and operations.
The European Sustainability Reporting Standards (ESRS) face substantial revision. EFRAG published draft simplified ESRS on 3 December 2025, removing all voluntary disclosures and reducing required datapoints by 61% where material.
The scope reduction may represent a 70% decrease in companies subject to CSDDD obligations. Companies with franchising or licensing agreements in the EU remain in scope where royalties exceed EUR 75 million in the last financial year, or where net worldwide turnover exceeded EUR 270 million.
For CSRD, many current "wave 1" companies will fall out of scope due to new criteria. Member States may exempt such companies from reporting obligations for financial years beginning between 1 January 2025 and 31 December 2026, with new scoping criteria entering force for financial years starting 1 January 2027.
The removal of EU-wide civil liability means individual Member States will determine whether CSDDD non-compliance exposes companies to civil liability risks. The requirement to review civil liability effectiveness has been eliminated.
Companies must verify their status under the new thresholds immediately. Those falling out of scope may discontinue certain compliance activities, while those remaining in scope must prepare for modified obligations.
The "value-chain cap" limits what in-scope companies can request from smaller out-of-scope partners. Companies cannot request information from "protected undertakings" (those not exceeding 1,000 employees on average) beyond information set out in the Voluntary Sustainability Standards for SMEs (VSME). Reporting companies may rely on self-declarations from protected undertakings in their value chains.
For recent acquisitions or mergers changing group composition during the financial year, parent companies may choose not to include such subsidiaries in consolidated reports for the relevant reporting period, postponing inclusion to the next financial year.
The Omnibus I Directive enters into force 20 days after Official Journal publication, expected within days of the 24 February 2026 adoption. Member States have 12 months from entry into force to transpose CSRD amendments.
CSDDD transposition deadline is delayed to 26 July 2028, with company compliance required from 26 July 2029. First CSDDD reports will cover financial years starting on or after 1 January 2030. The Commission must publish initial due diligence guidelines by July 2027.
The Commission will review CSDDD implementation and effectiveness by 26 July 2031, with subsequent reviews every five years. The Commission must adopt revised ESRS within six months of the Omnibus I Directive's entry into force and new VSME standards within four months.
Member States retain discretion over civil liability regimes for CSDDD non-compliance. The removal of EU-wide civil liability provisions means enforcement mechanisms will vary significantly across Member States.
For CSRD, Member States may provide exemptions for current "wave 1" companies during the transition period between 1 January 2025 and 31 December 2026, creating potential regulatory fragmentation during implementation.
Companies should immediately assess their status under new thresholds using both individual entity and consolidated group metrics. Those falling out of scope should document the basis for exemption and monitor for threshold changes that could bring them back into scope.
For companies remaining in scope, review existing due diligence processes to align with the narrowed "scoping" approach. Prioritise assessment of direct business partner impacts and ensure information requests to smaller partners comply with the value-chain cap restrictions.
Companies currently subject to CSRD reporting should evaluate exemption eligibility for the 2025-2026 transition period while preparing for revised ESRS implementation. Monitor Commission adoption of simplified standards expected within six months.
Establish monitoring systems for the Commission's July 2027 due diligence guidelines and track Member State transposition approaches, particularly regarding civil liability frameworks.
European Commission - Corporate Sustainability Due Diligence: https://commission.europa.eu/topics/business-and-industry/doing-business-eu/sustainability-due-diligence-responsible-business/corporate-sustainability-due-diligence_en
Council of the European Union Press Release - 9 December 2025 provisional agreement
European Financial Reporting Advisory Group (EFRAG) - Draft simplified ESRS published 3 December 2025
Commission Recommendation (EU) 2025/1760 on voluntary reporting standards
Official Journal of the European Union - Directive (EU) 2026/470 (publication pending)