EU member states in the European Council approved an agreement under the “Omnibus I” simplification package that significantly reduces sustainability reporting and due diligence obligations for companies.
The approval marks the final major step toward adopting the new rules, which substantially narrow the scope of companies covered by major sustainability laws, including the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive, following their endorsement by lawmakers in the European Parliament in December.
The final Omnibus agreement goes significantly beyond the European Commission’s initial 2025 proposal under its simplification and competitiveness agenda, introducing far deeper cuts to sustainability reporting and due diligence obligations.
The Commission had originally proposed reducing the scope of the Corporate Sustainability Reporting Directive by around 80%, raising the employee threshold from 250 to 1,000, while maintaining the 1,000-employee threshold under the Corporate Sustainability Due Diligence Directive. It also sought to focus due diligence primarily on direct business partners, limit data requests to smaller value-chain companies, and streamline compliance requirements.
However, after the legislation was reopened, both the European Parliament and the European Council pushed for substantially sharper reductions.
Under the newly approved agreement, the CSRD retains the 1,000-employee threshold but introduces an additional €450 million annual revenue threshold, excluding an estimated 90% of companies from reporting requirements.
The changes to the CSDDD are even more extensive, raising its applicability threshold to 5,000 employees and €1.5 billion in revenue—effectively removing the vast majority of companies from its scope.
Beyond narrowing coverage, the agreement removes the CSDDD obligation to adopt climate transition plans, eliminates the EU-wide civil liability regime, caps penalties at 3% of global turnover, and delays implementation by one year, with compliance now required from July 2029.
Consistent with the Commission’s original proposal, the agreement also limits the information that large companies can request from smaller supply chain partners. Companies with fewer than 1,000 employees may refuse to provide data beyond the voluntary sustainability reporting standard for SMEs (VSME), and firms under the CSDDD are encouraged to rely primarily on reasonably available information instead of systematically demanding disclosures from smaller value-chain entities.
In announcing the approval, the European Council emphasized that the package reduces complexity, cuts red tape, and enhances flexibility for in-scope companies, positioning the reforms as a measure to strengthen EU competitiveness in a shifting geopolitical environment.
