EU: Commission publishes first Omnibus package with changes to CSRD and CSDDD

On 26 February 2025, the European Commission published the much-anticipated first Omnibus package, with proposals to simplify the Corporate Sustainability Reporting Directive (“CSRD”) and the Corporate Sustainability Due Diligence Directive (“CSDDD”) – see press release, Q&A and proposals.

This included: 

• A proposal for a Directive amending the dates of application of the CSRD and CSDDD (also known as the “stop-the-clock” proposal) (see here); and
• A proposal for a Directive amending certain reporting and due diligence requirements in the CSRD and CSDDD (see here).

The proposals remain subject to negotiation with the European Parliament (“EP”) and Council (see more on next steps below). 

In addition to changes to the CSRD and CSDDD, the first Omnibus package also includes separate proposals for changes to the EU Taxonomy and the Carbon Border Adjustment Mechanism (“CBAM”). This blog post focuses just on the proposed changes to the CSRD and CSDDD. We have a separate blog post on the proposed changes to the Taxonomy and will publish on the CBAM shortly.

Proposed key changes to the CSRD

Timing

• The “stop the clock” proposal would delay for two years CSRD reporting requirements for companies currently due to start reporting in 2026 (broadly large EU undertakings and large non-EU issuers) and 2027 (broadly listed SMEs – which will fall out of scope entirely under the proposed scoping amends, see below).  Third country parent undertakings due to report in 2029 would continue to do so.
• No delay is envisaged for those currently reporting in 2025 (although scoping changes envisaged by the "reporting and due diligence" proposal could mean that once it is transposed some of these companies will fall out of scope entirely, and those that remain may technically not have a further reporting requirement until 2028. It is unclear if this is actually what the Commission intended.

Scoping (EU companies and non-EU issuers)

• They key change envisaged by the proposals for EU undertakings and non-EU issuers (whether individually or on a consolidated basis) is that to be in scope they would need to exceed, on their balance sheet date, an average number of 1,000 employees during the financial year (existing balance sheet and turnover tests remain unchanged). 
• In addition, listed SMEs who were previously in-scope would now fall out of scope entirely. 

Scoping (non-EU ultimate parent companies)

• The proposals envisage that: 
  • ultimate non-EU parent undertakings will now only be in scope if they generate (on a consolidated basis) a net turnover in the European Union exceeding EUR 450 million (increased from EUR 150 million). 
  • They must also have either: (a) a large EU subsidiary (existing definition applies without any increase in employee threshold); or (b) an EU branch which generated a net turnover exceeding EUR 50 million (up from EUR 40 million). 

As the 1000 employee threshold does not apply to these scoping provisions, non-EU parent undertakings could now fall in scope of the CSRD even if they do not have an EU subsidiary that is in-scope of CSRD in its own right (whether on an individual or consolidated basis). 

Overall, the scoping threshold amends are expected to reduce the number of in-scope companies by about 80%.

Value chain cap

• The proposals provide that companies in scope of the CSRD should not seek to obtain sustainability information that goes beyond the information to be set out in a voluntary reporting standard from companies in their value chains with fewer than 1,000 employees. This will be developed by the Commission and could be based on the existing VSME standards developed by EFRAG 
• This limitation is subject to the caveat that sustainability information can be requested where it is information commonly shared between undertakings in the sector concerned.

Taxonomy reporting

• The proposals provide that Taxonomy reporting (currently mandatory for all EU undertakings in-scope of the CSRD) would become optional (and more flexible) in certain circumstances for EU undertakings which are in scope but do not have a net turnover exceeding EUR 450 million (individually or on a consolidated basis). Please see our separate blog post for more details on this and the substantive amendments proposed to the Taxonomy itself.

Amendments to the ESRS and further reporting standards

• The Commission intends to revise the existing European Sustainability Reporting Standards (ESRS) to reduce substantially the number of data points, clarify provisions deemed unclear and improve consistency with other pieces of legislation. These changes are due to be adopted as soon as possible and in any event within six months after entry into force of the proposals (following which time they will need to be officially adopted – see next steps below).
• Despite much speculation in the lead up to publication of the first Omnibus package, the principle of double materiality has not been amended.
• The proposals also remove the power for the EU Commission to adopt sector-specific standards. However, there is no indication as yet that the requirement for entity-specific disclosures will be removed. Therefore, companies will still need to consider whether their material impacts, risks or opportunities are covered in sufficient detail by the ESRS, and if not, they may need to include additional disclosures.  

Assurance

• The proposals would remove provisions which contemplated an uplift in assurance requirements from limited assurance to reasonable assurance. Provisions in relation to the adoption of assurance standards by the EU Commission have also been amended to allow the EU Commission to instead adopt targeted assurance standards by 2026. 

Proposed key changes to the CSDDD

Timing

• The proposals would postpone the transposition deadline and the first wave of application of the CSDDD by one year. 
• The deadline for transposition into national law would be 26 July 2027 (instead of 2026) and the first wave of companies would therefore have to comply from 26 July 2028 (instead of 2027). There has been no delay for companies who were originally envisaged to come into scope from 26 July 2028 or 26 July 2029.

Transition plans

• In scope companies will still be required to adopt a transition plan. However, the requirement to “put into effect” the transition plan has now been replaced with the requirement to include implementing actions in the transition plan. The provisions are otherwise unchanged, and in particular there is still a requirement to include time-bound targets, and to update the plan every 12 months and ensure it contains a description of the progress made towards achieving those targets. 

Value chain due diligence for direct business partners

• Companies would not have to systematically conduct in-depth assessments of adverse impacts of indirect business partners and would only be required to carry out such assessments where the company has plausible information suggesting that adverse impacts have arisen or may arise. 
• The recitals give broad examples for what constitutes “plausible information” suggesting that this will not be the row-back on the diligence obligation that it may seem at first glance. Companies will also still be required to map their value chains to identify general areas where adverse impacts are most likely to occur and to be the most severe, including in relation to indirect business partners.

Changes to civil liability regime

• The current provisions in the CSDDD on harmonised (EU-wide) civil liability would be removed under the proposals, as well as the obligation for Member States regarding representative actions by trade unions or NGOs. This means that civil liability, and the legal standing of trade unions or NGOs, would be defined by the national law of each Member State. However, Member States will be required to ensure that where a company is held liable for damage caused by a failure to comply with the CSDDD, the affected persons should have a right to full compensation but not punitive damages.

Reducing the “trickle-down” effect

• The proposal would limit the information that companies within scope of the CSDDD may request from direct business partners with fewer than 500 employees as part of their mapping of their operations, those of their subsidiaries and where related to their chains of activities, those of their business partners. 
• This limitation would apply unless a company needs additional information to carry out the mapping (for instance on impacts not covered by the standards) and they cannot obtain that information in any other reasonable way.

Other amends

• Termination: The proposals would remove the obligation to terminate business relationships as a last resort measure but retain the possibility of suspension of business relationships in certain circumstances. 
• Frequency of due diligence reviews: The frequency of periodic assessments and updates would be extended from one year to five years, but a company would need to assess the implementation of its due diligence measures and update them whenever there are reasonable grounds to believe that the measures are no longer adequate or effective.
• Penalties/fines: The proposals would remove the provision that provides for penalties to be based on net worldwide turnover and that any cap on penalties should not be less than 5% of net worldwide turnover. Instead, the Commission will be required to set guidelines for penalties. 
• The maximum harmonisation provisions would be extended to more provisions regarding core due diligence obligations to ensure a more level playing field across the EU, although these have not been extended to the transition plan provisions.
• The requirement for the Commission to review whether the downstream activities of financial services should be included in the scope of the CSDDD would be deleted. 
• The deadline for guidance and best practices on how to conduct due diligence which the Commission is required to produce will be brought forward from 26 January 2027 to 26 July 2026.

Next steps 

These proposals will now need to be debated and agreed on by the European Parliament (“EP”) and Council. 

The co-legislators will first need to appoint a committee to lead from their perspective on the proposals and then agree their respective negotiating positions before the detailed negotiations between the legislators (trilogues) can start. 

The Commission has asked (see here) the EP and Council to “fast-track” these proposals – in particular the “stop the clock” proposal. It is unclear at this stage whether the co-legislators will agree to do this and even under the “fast-track” process, the overall timing is uncertain.

Outside of the “fast-track” process, a Commission proposal subject to the ordinary legislative procedure would normally take around 18 months to be finalised and adopted. In this case, time is of the essence as companies in the CSRD “second wave” will be required to submit their first CSRD reports in 2026 (in respect of the 2025 financial year) unless that date is postponed (and companies in the “first wave” will have to continue reporting until any scope change which might take them out of scope is agreed).

It is possible that the EP and Council suggest other amendments to the CSRD and CSDDD than the Commission has proposed. The Commission has urged the co-legislators not to do this so that the proposals can be finalised as soon as possible, but it does not have the power to block any such moves.