European Institutions Reach Agreement on Sustainability Omnibus
Key points
- Major changes to the CSRD and CSDDD include narrowed scope, removal of the climate transition plan obligation, and targeted exemptions and timing reliefs.
- The final text reflects compromises across the EU institutions.
On 16 December 2025, the European Parliament (Parliament) adopted the Detailed Omnibus Directive, which is part of the first Omnibus simplification package. The adoption is likely to result in substantive amendments to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).
Background
On 25 February 2025, the European Commission (Commission) unveiled the first Omnibus package to advance EU competitiveness and simplification. Among other measures, the package proposed streamlining key sustainability frameworks. The Detailed Omnibus Directive revises scoping thresholds, removes the climate transition plan requirement, and implements targeted amendments across the CSRD and CSDDD.
For more information on further elements of the Omnibus proposal, as well as an overview of EU corporate sustainability regulation, see this Latham article.
CSRD: Key Updates
|
Issue |
Original Position |
Revised Position |
|
Scope for EU companies and groups |
Companies that meet two of the following three thresholds (when consolidated with any subsidiaries):
|
Companies that meet both of the following thresholds (when consolidated with any relevant subsidiaries):
|
|
Scope of global group (Article 40a) reporting |
Non-EU headquartered groups with:
|
Non-EU headquartered groups with:
|
|
Scope (financial holding companies) |
Financial holding companies treated the same as any other company |
Exemption (in both EU company and global group reporting) for financial holding companies that do not involve themselves in management of subsidiaries and have subsidiaries with business models and operations independent from one another |
|
Wave 1 reporting delay |
Wave 1 reporters commenced reporting in relation to financial years beginning on or after 1 January 2024 |
Transitional exemption whereby Member States have the option to exempt wave 1 reporters that do not meet the revised criteria for financial years starting in 2025 and 2026 |
|
Value chain cap |
The concept of a value chain cap is not included in the original text |
Introduces a value chain cap that applies to companies in the value chain with fewer than 1,000 employees (“protected undertaking”)
Reporting companies are prohibited from seeking information from protected undertakings exceeding the voluntary sustainability reporting standards to be adopted by the Commission |
|
Reasonable assurance |
Includes the potential for the Commission to require reasonable assurance of reporting, with the ability to adopt standards for reasonable assurance by 1 October 2028 |
Reasonable assurance requirements will not be introduced, and the assurance standard will remain as limited assurance |
|
Parent company reporting exemption for large, listed entities |
Large undertakings with transferable securities admitted to trading on a regulated EU market were prohibited from relying on the parent company exemption from reporting |
Parent company exemption is available to all entities |
|
The production of sector-specific guidelines |
Includes the empowerment for the Commission to adopt sector-specific reporting standards by way of delegated acts |
This empowerment is removed, with the Commission instead having the option to produce sector-specific voluntary guidelines |
The revised thresholds will exempt all but the largest companies from reporting requirements under the CSRD. Throughout the negotiation process, the scope of the CSRD has been a key topic of discussion, with the Parliament advocating for an even higher employee threshold of 1,750.
CSDDD: Key Updates
|
Issue |
Original Position |
Revised Position |
|
Scope for EU companies and groups |
Companies that meet the following thresholds (when consolidated with subsidiaries in the case of ultimate parent companies):
|
Companies that meet the following thresholds (when consolidated with subsidiaries in the case of ultimate parent companies):
|
|
Scope for non-EU companies |
Companies that produced net turnover in the EU of more than €450 million (when consolidated with subsidiaries in the case of ultimate parent companies) |
Companies generating net turnover in the EU of more than €1.5 billion (when consolidated with subsidiaries in the case of ultimate parent companies) |
|
Climate transition plans |
Companies required to adopt and implement a climate transition plan with targets for 2030 and every five years up to 2050 |
Mandatory climate transition plan requirements deleted |
|
Identification and assessment of adverse impacts |
Requirement to carry out an in-depth assessment of own operations, those of subsidiaries, and, where related to their chains of activities, those of their business partners in the areas where adverse impacts were identified to be most likely to occur and most severe |
Companies can focus on the areas of their chains of activities where actual and potential adverse impacts are most likely to occur
When a company has identified adverse impacts equally likely or equally severe in several areas, they are given the ability to prioritise assessing adverse impacts which involve direct business partners
Companies may also base their efforts on reasonably available information |
|
Civil liability |
Comprehensive EU-wide civil liability system with overriding mandatory application |
Removes theEU harmonised liability regimeand the requirement for Member States to ensure that the liability rules are of overriding mandatory application in cases where the applicable law is not the national law of the Member State
Inserted a review clause on the need for an EU harmonised liability regime |
|
Penalties |
Member States required to set penalties, with maximum penalties set at a minimum of 5% of a company’s worldwide turnover |
Member States required to set penalties, with a maximum cap on penalties of 3% of an ultimate parent company’s consolidated worldwide turnover, with the Commission issuing guidelines on penalties |
|
Timing and transposition |
Transposition deadline of 26 July 2027, with first companies being in-scope from 26 July 2028 |
Transposition deadline moved to 26 July 2028, with applicability from July 2029 |
|
Value chain cap |
The concept of a value chain cap is not included in the original text |
Introduces a value chain cap. Companies may request information from businesses partners only where that information is necessary, and in the case of companies with fewer than 5,000 employees, only when the information cannot reasonably be obtained by other means |
|
Position in relation to the requirement to suspend or terminate business relationships |
The company is required to terminate the business relationship with respect to the activities concerned if the potential adverse impact is severe and if there is no reasonable expectation that mitigation measures will succeed |
For potential adverse impacts that cannot be prevented or adequately mitigated, the company shall (as a last resort, and until the impact is addressed) suspend the business relationship where the law governing its relationship with the business partner concerned entitles it
As long as there is a reasonable expectation that the enhanced prevention action plan will succeed, continuing to engage with the business partner shall not expose the company to penalties or liability under the CSDDD |
The Parliament advocated for the removal of the requirement for a climate transition plan as part of the CSDDD, and the ultimate text is consistent with that position. The CSRD still requires companies to disclose a climate transition plan, if one exists, but this is a less prescriptive obligation than a mandate to adopt and implement such a plan (as was proposed under the CSDDD originally).
Next Steps
Once the European Council formally adopts the text, it will be published in the Official Journal and will enter into force 20 days thereafter.
Latham & Watkins will continue to monitor ESG and sustainability regulatory developments in the EU and globally.
This article was prepared with the assistance of Samantha Banfield at Latham & Watkins.