The European Parliament, the Council and the Commission concluded negotiations late on 8 December on the Sustainability Omnibus, the highly politicised proposal to amend the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive. Though the agreed text is not available at the time of writing, the Council and the Parliament issued press releases with key details.
CSRD
The thresholds for reporting under CSRD will be raised to 1000 employees and net annual turnover of €450m for EU companies and groups, and €450m of EU turnover for non-EU groups. Financial holding companies will be exempt from reporting.
Wave one companies – those previously reporting under the Non-Financial Reporting Directive – will benefit from a "transition exemption" for 2025 and 2026, though it is not clear whether this is a total exemption from reporting or a limit to what will need to be reported in the next two years.
At the same time, last week EFRAG recently delivered its advice to the European Commission regarding a much simplified set of European Sustainability Reporting Standards ("ESRS"), so that those who remain in the scope of CSRD can expect reporting to be easier than at present. The Commission is expected to adopt the standards, potentially with revisions, in mid-2026. EFRAG paused the development of sector-specific standards in the early part of 2025; under the agreed CSRD text, sector-specific reporting will remain voluntary.
CS3D
The Commission had not proposed to amend the scope of CS3D, already significantly higher than CSRD. However the European Parliament and Council both favoured an increase. The outcome of the negotiations sees the scope limited to EU companies with more than 5000 employees and €1.5bn of turnover and non-EU companies with more than €1.5bn of EU turnover. There is no employee threshold for non-EU companies, a controversial point given that it could result in smaller but high turnover non-EU companies being in scope, whereas an equivalent size EU company would fall out of scope thanks to the additional employee criterion (which could be particularly relevant for financial services businesses).
The due diligence obligations will require a risk-based approach that is not limited to tier 1 business partners, but allows companies to focus on the areas in their business, that of their subsidiaries and in their chain of activities where impacts are most likely to occur. The detailed mapping exercise will be replaced with a general scoping, based on reasonably available information.
Critically, the European Parliament was able to secure agreement to entirely delete the obligation for companies to adopt a climate transition plan, as well as the harmonised civil liability provisions.
What next?
The text has been agreed, but needs formal approval by both the European Parliament and the Council in the coming days and weeks. It will then enter into force 20 days after publication, and Member States will need to adopt national legislation to implement the changes within 12 months. The delayed reporting for EU companies and groups is due to begin in financial year 2027 with publication of the reports in 2028, with non-EU groups reporting a year later.
