[udated version of an article initially published on 27 January 2026]
Following a month of trilogue negotiations, the European Parliament approved the compromise text amending the CSRD and the CSDDD in December 2025. On 24 February 2026, the Council also gave its final green light. The Omnibus I Directive has been published in the EU Official Journal on 26 February 2026. Member States have to transpose this directive into national law by 19 March 2027, with the exception of the provisions concerning the CSDDD, which have to be transposed by 26 July 2028 only.
Introduction
In response to widespread concerns about the administrative and financial burden imposed on companies, the European Commission presented its Omnibus Simplification Package on 26 February 2025. This package aimed to strengthen the EU’s competitiveness by significantly simplifying sustainability reporting and reducing due diligence burdens arising under the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the Taxonomy Regulation.
On 17 April 2025, the “Stop-the-Clock” Directive entered into force to immediately postpone application of the CSRD and the CSDDD (see here). Belgium transposed this Directive into its national law on 12 December 2025 (see here).
On 9 December 2025, the Council’s presidency and the European Parliament’s negotiators reached provisional agreement (see here). Following approval by Coreper II (Council) on 10 December 2025 and the JURI Committee (of the Parliament) on 11 December 2025, the proposal was adopted by a plenary vote in the European Parliament on 16 December 2025 (see here). On 24 February 2026, the Council also approved the proposal. The text of this directive (the “Omnibus I Directive”) has been published in the EU Official Journal on 26 February 2026 (see here).
Main substantive changes to the CSRD
Significantly reduced scope
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EU companies and groups. The current scope of the CSRD encompasses listed undertakings and large undertakings and groups that meet at least two of the following three criteria: (i) balance sheet total of EUR 25 million, (ii) net turnover of EUR 50 million and (iii) average of 250 employees during the last financial year. Following the Omnibus I Directive, this "2-out-of-3" rule is replaced by stricter cumulative thresholds. Accordingly, reporting requirements apply only to undertakings that had both net turnover exceeding EUR 450 million and an average of more than 1,000 employees during the last financial year. Even if their securities are listed on an EU regulated market, listed undertakings that do not exceed these cumulative thresholds are no longer in scope of the CSRD either.
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Non-EU ultimate parent companies. The obligation for EU subsidiaries or branches of third-country ultimate parent companies to publish a sustainability report remains subject to two cumulative thresholds. First, this obligation applies to EU subsidiaries with a net turnover exceeding EUR 200 million in the preceding financial year (instead of the aforementioned ‘large undertaking’ criteria). In the absence of a subsidiary, the same EUR 200 million threshold applies to EU branches of third-country ultimate parent companies (instead of EUR 40 million). Second, the reporting obligation only applies to these subsidiaries and branches if the third-country company generates net turnover in the EU exceeding EUR 450 million in the previous two consecutive financial years (instead of EUR 150 million).
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Exemption for “wave 1” undertakings. The stricter cumulative thresholds will come into effect for “wave 1” undertakings in financial years starting on or after 1 January 2027. This means that they will have to continue to report on sustainability matters for previous financial years. However, Member States may opt to exempt them, in consideration of the fact that most of these undertakings will fall out of scope as of 2027.
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Exemption for financial holdings. If EU companies are financial holdings with subsidiaries having business models and operations independent from each other, they may choose whether or not to report consolidated sustainability information. To ensure a level playing field, third-country parent companies that qualify as such financial holdings are also exempted from having to carry out certain obligations under the Omnibus I Directive if one of their subsidiaries established in the EU is designated to fulfil those obligations on behalf of the parent. Moreover, both exceptions are strictly limited to those holdings with no direct or indirect involvement in the management of their subsidiaries.
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Exemption for subsidiaries. All subsidiaries – including listed (subsidiary) companies – are entitled to make use of the subsidiary exemption where the sustainability information is included in a consolidated report issued by their parent company.
Review clause
The Commission has to submit a report to the European Parliament and the Council by 30 April 2031 and every three years thereafter, assessing whether the scope of the provisions amended by the Omnibus I Directive should be extended and, if so, how. The Directive emphasises the need for this assessment in relation to large undertakings with net turnover not exceeding the aforementioned thresholds, as well as third-country undertakings operating directly in the EU internal market without a subsidiary or a branch on the territory of the EU.
“Protected undertakings”
Certain undertakings from which CSRD-reporting undertakings request information for the purpose of their sustainability reporting may decline to provide information that goes beyond that which is specified in the voluntary standards. These VSME standards will be adopted by the Commission through a delegated act four months after the Omnibus I Directive comes into force and will be based on the Commission Recommendation published in July 2025 (as discussed in our previous article).
The prerogative of declining these requests falls only to undertakings that (i) are in the value chain of a CSRD-reporting undertaking, and (ii) did not exceed an average of 1,000 employees during the preceding financial year. Reporting undertakings may rely on a self-declaration from these protected undertakings in their value chain to determine whether they qualify as protected undertakings.
Main substantive changes to the CSDDD
Transposition deadline put back
The “Stop-the-Clock” Directive postponed the original deadline for transposing the CSDDD into national law by one year (26 July 2027 instead of 26 July 2026). The Omnibus I Directive puts it back by a further year, with the new deadline set at 26 July 2028. The first-time application for all companies is also deferred to 26 July 2029. Consequently, Member States are not obliged to designate one or more supervisory authorities until 26 July 2028.
Significantly reduced scope
The Omnibus I Directive increases the thresholds for EU companies to 5,000 employees (instead of 1,000 employees) and net turnover exceeding EUR 1.5 billion (instead of EUR 450 million). The CSDDD will also apply to third-country companies generating net turnover in the EU of more than EUR 1.5 billion (instead of EUR 450 million). For franchising and licensing models, only companies generating net turnover in the EU of over EUR 275 million and more than EUR 75 million in royalties in the EU remain in scope (instead of EUR 80 million and EUR 22.5 million, respectively).
Risk-based approach
The entity-based approach, where due diligence requirements are limited to the company’s own operations and those of its subsidiaries and direct business partners, is replaced by a risk-based approach. Companies will be required to conduct a scoping exercise to identify areas in their value chain where adverse impacts are most likely to occur. When conducting this exercise, they are no longer required to carry out a comprehensive mapping exercise of every business partner across their value chain. Instead, companies have to conduct a more general scoping exercise. During this exercise, they should use only information that is reasonably available to them, which, as a general rule, will means they won’t be requesting information from business partners in this regard.
No transition plan
The Omnibus I Directive does away with the obligation for companies to adopt and put into effect a transition plan for climate change mitigation. However, the CSRD requirement to disclose a transition plan to ensure that the company’s business model and strategy “are compatible with” the transition to a sustainable economy remains unchanged. This means that companies in scope of the CSDDD (and thus the CSRD) are still required to disclose any plans that they do have. Of note is the fact that the CSRD does not impose any substantive obligation to adopt a transition plan in cases where the relevant company does not have one. In that event, it is sufficient to provide a clear explanation for not providing a transition plan.
No harmonised third-party liability
The EU-wide third-party liability regime has been removed. As a result, companies’ liability for harm caused to third-party natural or legal persons by intentional or negligent non-compliance with their due diligence obligations continues to be governed by national law.
Reduced maximum monetary penalties
Member States must provide for monetary penalties for infringement of the national laws implementing the CSDDD. The maximum cap has been reduced from 5% or more of the company’s net worldwide turnover in the financial year preceding that of the infringement decision to a fixed maximum cap of 3%.
Next steps
The European Parliament’s and the Council's approval of the compromise text were the final steps in the European legislative procedure for the substantive Omnibus proposal.
The text of the Omnibus I Directive has been published in the EU Official Journal on 26 February 2026. It will enter into force on 18 March 2026, after which it has to be transposed into national law by 19 March 2027 for the CSRD-related amendments and by 26 July 2028 for the CSDDD-related amendments.
