The Omnibus – complaints lodged about the process whilst the Council considers amendments

Following agreement on the ‘stop-the-clock’ directive, which will delay the dates from which the EU’s flagship Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CS3D) will apply, attention has now turned to the second directive proposed as part of the EU’s sustainability simplification omnibus package. 

This second directive (the Amending Directive)^[1] focusses on making wide-ranging changes to the content of the CSRD and CS3D, and will be subject to significantly more negotiation and scrutiny from civil society and the EU’s own institutions. Two key recent developments are summarised below. 

Civil society challenges to the omnibus process

On 18 April 2025, ClientEarth and seven other NGOs filed an official complaint to the European Ombudsman[2] about the process behind the Amending Directive. The complaint alleges that the European Commission’s procedures amounted to maladministration on the basis that the Commission failed to: (i) conduct an impact assessment; (ii) carry out a public consultation; and (iii) adhere to EU rules and principles around ensuring a transparent, evidence-based and inclusive policy and law-making process.

The Ombudsman has a range of tools at their disposal, which can include setting out their findings if the complaint is upheld and not otherwise resolved, and making recommendations and suggestions for how the Commission’s processes can be improved in the future. 

However, the Ombudsman’s investigation timings can be lengthy. It is unclear what, if any, impact the complaint will have in practice on the omnibus process, given uncertainty around the timing of the Amending Directive (which is expected to be finalised in or around the middle of 2026, although estimates vary). 

The Council’s proposed amendments to the Amending Directive

Despite the objections, the draft Amending Directive has been sent to the Council of the Europe Union (the Council) for initial consideration as part of the EU’s trilogue process. In late April, a version of the Council’s compromise text which proposes several key changes became public,  and is summarised below.[3] 

1. Greater clarity for those already reporting under the Corporate Sustainability Reporting Directive (CSRD)

Under the Council’s proposals, the first set of undertakings and issuers subject to the CSRD (‘wave 1’, being public interest entities and large listed companies) would need to report for financial years starting between 1 January 2024 and 31 December 2026 inclusive, unless Member States exempted them from this obligation, which the Amending Directive would empower them to do. 

One effect of the change would be that public interest entities and issuers who are large, with between 501 and 1000 employees on average during the financial year, would fall outside of the scope of the CSRD on or after 1 January 2027 (but would still need to report before that date, unless exempted at national level). Similar provisions would apply to parents of large groups which have between 501 and 1000 employees on average on a consolidated basis during the relevant financial year.

2. Greater flexibility in Taxonomy-related reporting

The Council’s text offers some drafting clarifications that appear to confirm the Commission's intention of making Article 8 Taxonomy Regulation reporting optional for undertakings with a net turnover of EUR 450,000,000 or less.

These undertakings would be exempted by the Amending Directive from the reporting requirements in Article 8 of the Taxonomy Regulation (which requires undertakings to report on the extent to which their activities are associated with economic activities that qualify as environmentally sustainable under the Taxonomy Regulation).

These undertakings could then opt to report publicly on full or partial Taxonomy alignment, suggesting that if they make no claims to Taxonomy alignment, such reporting is not required. 

3. SMEs would not be precluded from sharing information commonly shared in their sector

The Amending Directive includes provisions to limit how much sustainability information large undertakings can ask for from small and medium enterprises in their value chain. Notwithstanding this, the Council’s amendments make clear that SMEs should not be prevented from continuing to share sustainability information that is common to a particular sector and that they already share.[4]

4. The CS3D’s due diligence obligations would be defined differently

The Council is proposing to limit the scope of the human rights and environmental due diligence assessment companies would be required to carry out to the company’s own operations, those of its subsidiaries, and those of its direct business partners (ie ‘tier 1’) - unless there is “plausible information” that suggests an adverse impact at the level of an indirect business partner in tier 2, 3, 4 etc. This is distinct from the CS3D as it is in force currently, which requires consideration of indirect as well as direct business partners.

The Council’s proposal would define “plausible information” differently to the Amending Directive, as being: “information that objectively has a reasonable likelihood of being true, taking into account amongst other things the credibility of the source”. The Council proposal then provides an extensive but not exhaustive list of what sources might be included[5] and examples of information that suggest that there is an adverse impact[6].

Whilst both the Amending Directive and the Council’s proposals recognise that “plausible information” should trigger a company to carry out an in-depth assessment of their relevant indirect business partners, the Council’s version adds some additional detail. Specifically, that the assessment should be aimed at obtaining accurate and reliable information, in particular about the nature and extent, causes, severity and likelihood of the identified adverse impacts. This is with a view to enabling the company to more effectively prioritise which adverse environmental and human rights impacts to address first, in line with the CS3D’s requirements.

The obligation on companies to “seek to ensure” that their suppliers follow their code of conduct has also been softened to say that companies should “be able to request” this. 

Next steps

The above proposals are not yet confirmed as final and in any event are subject to further debate and comment, including from the European Parliament. As such, they are likely to change further between now and when the final form of the Amending Directive is finally agreed – which is expected to be in 2026. 

The effect of the changes on companies will also depend on developments in other parts of the omnibus simplification package, as well as outside it. These developments include the proposed simplification of the European Sustainability Reporting Standards (ESRS) which the European Financial Reporting Advisory Group (EFRAG) is tasked with working on, and the preparation of updated guidance aimed at simplifying the application of the EU’s deforestation regulation.

[1]Omnibus I - COM(2025)81.

[2]Complaint to the European Ombudsman.

[3] Please note, the compromise text may be subject to change, as the Counsel as has confirmed or denied its position at the time of writing.

[4] Even where the SME itself does not otherwise have to carry out sustainability reporting, or it has no obligation to disclose the information under the Amending Directive.

[5] These include: “data produced by government bodies, baseline studies or impact assessments commissioned by other parties, local community grievances and demand records, studies and indices by academics, NGOs, government agencies and industry bodies, available reports prepared by other enterprises operating in the local area or region, studies and reports by intergovernmental organisations and multilateral and bilateral development institutions, studies undertaken by communities about key issues that may be relevant to project development, land mapping and other information about the project or activity”.

[6] These include: “a notification or complaint, stakeholder engagement, credible reports in the media or from international organisations or NGOs, environmental and social impact assessments, geographical risk assessments, reports of recent incidents, or information about recurring problems in the sector in which the company operates or at certain locations”.