Omnibus Update: EU passes legislation to amend CSRD and CS3D, drawing the saga to a close (for now)

The trilogue negotiations on revisions to the content of the EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CS3D) were concluded and announced in the early hours of the morning on 9 December 2025, and confirmed in a Parliamentary vote today (16 December). The revisions include changes to the size of companies in scope and the extent of their obligations, in particular the removal of transition plan requirements. 

Proposals to amend the EU’s flagship corporate sustainability regulations were initially tabled by the European Commission in February this year as part of an ‘Omnibus’ of deregulatory legislation. The deregulatory process has been contentious from the outset, with the European Ombudsman recently finding that the Commission failed to follow its 'better regulation guidelines' prior to proposing the Omnibus measures. A long process of intra-institutional and inter-institutional negotiations between the Commission, the European Parliament and the European Council ensued.[1] The Commission identified a pressing need to ‘boost EU competitiveness’ in the face of strong global economic headwinds, but this had to be balanced against the EU’s historically market-leading regulatory approach to address climate risks and human rights abuses. 

This blog post briefly summarises the key changes agreed and how these may affect corporates and their group companies operating within the EU.

Overview of agreed changes

The expressed intent of the agreed amendments is to reduce the disclosure burden on companies within scope, as well as limit the trickle-down effect of these regulations on companies further down in the value chain, particularly SMEs. As was expected based on the negotiating mandates agreed by the Council and the Parliament, many of the changes which feature in the political agreement go beyond the initial changes suggested by the Commission in its original Omnibus proposals. 

The key changes agreed by the EU institutions include:

CSRD

• EU companies/groups: An increase of the threshold for applicability to companies with over 1000 employees, in line with the Commission’s proposals, but additionally, a further increase of the turnover threshold from €50m to €450m; and
• Non-EU companies/groups: In addition to the existing increase of the turnover threshold for third-country groups to €450m as proposed by the Commission, their in-scope subsidiaries also have to exceed a threshold of €200m;
• Smaller companies in the value chain: The introduction of specific protections from information requests for undertakings in the value chain of in-scope companies which have less than 1000 employees. In place of information that reporting undertakings are unable to obtain directly from the value chain, they are now permitted to use estimates;
• Financial holding undertakings: Those with diverse holdings will benefit from exemptions to reporting under the CSRD; and
• Sustainability assurance: Auditors assuring sustainability reporting will no longer need sustainability-specific qualifications. Moreover, third country auditors (and others who assure the reporting of third country EU-listed entities) will have simplified registration conditions and an exemption from supervision for a transition period (up to financial years ending 31 December 2030). 

CS3D

• Scope of applicability: An increase of the threshold for EU companies/groups to 5000 employees and €1.5bn in net turnover, which is estimated to include 1500 EU companies within scope, and to €1.5bn in EU turnover for non-EU companies/groups;
• Transition plans: Companies will no longer have to adopt a transition plan which is compatible “with the transition to a sustainable economy and with the limiting of global warming to 1.5°C in line with the Paris Agreement” (but there is no change to the CSRD obligation to report on such a plan if a company has one);
• Extent of due diligence: A risk-based framework should be used for identifying and assessing adverse impacts. This requires companies to focus on areas “where actual and potential adverse impacts are most likely to occur”, based on a scoping assessment carried out from reasonably available information;
  • This assessment may extend beyond a company’s own operations, those of its subsidiaries and those of its direct business partners (as proposed by the Commission) to include indirect business partners.
  • However, undertakings are “not required to identify every adverse impact” and may not automatically incur liability under the Directive if they fail to identify adverse impacts in their value chain.
• Smaller companies in the value chain: The introduction of specific protection from information requests for business partners with fewer than 5,000 employees, which can only be made “when the information cannot reasonably be obtained by other means”;
• Date of applicability: A further postponement of the deadline for compliance to July 2029; and
• Penalties for non-compliance: The removal of an EU-wide harmonised liability regime for failure to comply with the CS3D, in line with the Commission’s proposals, but with an additional reduction of the maximum level of fine from five to three percent of global turnover.

Other changes include: a new review clause, which is intended to ensure that the CSRD and CS3D remain fit for purpose and could result in a subsequent extension of their scope; a new digital portal providing guidance for reporting entities; and an extension of maximum harmonisation provisions, which safeguards companies from having different obligations under CS3D to national legislation which may already be in place.

Implications

Disclosure burdens

The most notable departures from the Commission’s proposals are the significant increase in thresholds for entities in-scope under both directives, and the removal of transition plan requirements from the CS3D. It has been estimated that the new thresholds may result in more than 80% of companies previously within scope of the CSRD and CS3D now falling outside of them. The removal of Paris-aligned transition plan requirements is also likely to be well-received by companies already struggling with large disclosure burdens, particularly in an environment of increasing scepticism towards the achievability of the 1.5°C goal.

It should be noted that in addition to raising eligibility thresholds, the disclosure burden under CSRD will be simplified even further through proposed amendments to the European Sustainability Reporting Standards (ESRS). The amendment directive specifies a period of six months for the ESRS amendment to be adopted. Based on the most recently released exposure draft of the revised ESRS, the amount of required disclosures is likely to be reduced by more than 60% in comparison to the existing ESRS. 

Downstream impacts

The introduction of protections for companies which are not within scope of the CSRD or CS3D, but are within the value chain of reporting entities, is likely to significantly reduce the impact of these pieces of legislation on these companies, while increasing the information-gathering burden on reporting entities or those carrying out due diligence. This is likely to increase the use of estimates, particularly by reporting entities, which would call into question the accuracy and dependability of the information reported in relation to their value chain. That being said, this does not preclude requests for, or the use of, information from the value chain in other contexts (such as voluntary disclosure frameworks like CDP).

Due diligence requirements

In respect of the CS3D, the move away from the Commission’s proposal of a defined perimeter (such as tier 1 relationships only) for carrying out due diligence to a risk-based approach is also significant. This seems to be a pragmatic acceptance of the difficulty faced by large companies with large supply chains in carrying out due diligence on all their direct business partners, while still retaining protections around the areas where actual and potential adverse impacts are most likely to occur. On the other hand, the additional protections around companies only being required to use information which is reasonably available to them when carrying out initial scoping, and the specific expectations that companies should not be held responsible for every adverse impact which is discovered in their operations, does mean that any adverse impacts which may take more effort to discover in practice are more likely to fly under the radar.

Conclusion

Following today’s vote in Parliament, the agreed text will will have to be formally approved by Council before it can be published in the Official Journal of the EU and passed into law. The conclusion of these negotiations is likely to come as a relief to most corporates, both because of the significantly reduced compliance burden that has been agreed, and also because of the end of the uncertainty which has made allocation of resources to compliance preparation extremely difficult throughout the course of this year. Nevertheless, the obligations which remain under the CSRD, CS3D and other related sustainability regulations are still substantial. The CSRD remains one of the most ambitious compulsory sustainability disclosure frameworks in effect, while the recitals to the amendment remind the reader that the CS3D exists within an ecosystem of EU regulation relating to the protection of human rights and the environment. Any companies which have adopted a ‘wait-and-see’ approach as the Omnibus directive has been progressing should ensure that they have sufficient systems in place for compliance if they remain within scope under the new thresholds.