Simplification in action — EU CSRD and CSDDD after the Omnibus I Directive

The Corporate Sustainability Reporting Directive¹ (the CSRD), which entered into force in January 2023, required a large number of EU-based and EU-linked corporate entities to publish detailed disclosures covering a wide range of sustainability topics.

The overall aim of the CSRD was to increase accountability and transparency of corporate sustainability reporting and to enable investors to easily obtain comparable sustainability metrics upon which to base investment and engagement decisions. The CSRD required in-scope entities to include in a dedicated section of the management report information necessary to understand both: (i) the company’s impact on sustainability matters; and (ii) how sustainability matters affect the company’s development, performance and position (the “double materiality principle”) against well over 1,000 sustainability-related data points.

The CSRD was to be implemented progressively, between 2024 and 2028. See our CSRD Factsheet for details.²

On February 26, 2025, the European Commission published its Omnibus I Simplification Package (the Omnibus Package) with proposed amendments to the CSRD and certain other sustainability-related initiatives.

In the Omnibus Package, the European Commission proposed to: (i) significantly decrease the number of entities in scope for CSRD reporting; (ii) reduce the number of mandatory data points required to be disclosed under the European Sustainability Reporting Standards (ESRS); and (iii) postpone reporting requirements for certain entities due to begin CSRD reporting in respect of their 2025 and 2026 financial years.

The Omnibus Package also includes proposed amendments to the Corporate Sustainability Due Diligence Directive³ (CSDDD), similarly aiming to simplify the reach of that directive. Please see our OnPoint “European Commission Proposes Simplification of the CSRD and Certain Other Sustainability-Related Initiatives”.⁴

Stop-The-Clock Directive

While the Omnibus Simplification Package was making its way through the EU legislative process, in April 2025 the Stop-The-Clock Directive (Directive (EU) 2025/794)⁵ was published which had the effect of (i) postponing by two years the entry into application of CSRD requirements for large companies not yet reporting and listed SMEs, and (ii) extending by one year the transposition deadline and first phase of application of CSDDD.

Quick Fix Regulation

The "Wave One" companies in scope of CSRD (broadly speaking, large public interest entities and large EU listed entities) and already in the process of reporting on 2024 data did not see their obligations change with the "Stop-The-Clock" Directive. It was only companies in "Wave Two" (broadly speaking, large private and EU listed entities not falling into Wave One) and "Wave Three" (broadly speaking, small and medium entities) that saw their obligations postponed.

On November 10, 2025, the Quick Fix Regulation⁶ was published in the Official Journal of the EU (OJ), entering into force on November 13, 2025. Amongst other things, the Quick Fix Regulation defers the requirement for Wave One companies to report on the anticipated financial effects of certain sustainability-related risks until the 2027 financial year. The Quick Fix Regulation applies retroactively from January 1, 2025.

The Omnibus I Directive

On February 26, 2026, the Omnibus I Directive⁷ which implements the Omnibus Package was published in the OJ.

The Directive entered into force 20 days after publication in the OJ (i.e. 18 March 2026). Member States must transpose the Directive into national law within 12 months of its entry into force, save for Article 4 which relates to amendments to the CSDDD where the transposition deadline is July 26, 2028.

CSRD – what is changing

1. Significant Reduction of the Number of Entities in Scope

To reduce the reporting burden on undertakings and to achieve the objectives of reporting in a more proportionate way reporting is now essentially limited to large EU undertakings and issuers or large third-country undertakings with an EU subsidiary or branch generating significant net turnover in the EU. It is thought that the amendments have reduced reporting entities by approximately 85%.

EU undertakings and EU issuers in scope are now limited to those with a net turnover exceeding EUR 450,000,000 and an average of more than 1,000 employees during the financial year will be subject to the obligation to report. EU parent undertakings of groups meeting the same thresholds on a consolidated basis are also in scope.

These requirements will apply for financial years starting from January 1, 2027 (Article 5, CSRD).

With regard to third-country undertakings (sometimes referred to as Article 40a undertakings), the thresholds are increased so that the entities in scope are those entities which generated a net turnover exceeding EUR 450,000,000 in the EU for each of the last two consecutive years (at a group or individual level) and with either (i) an EU subsidiary undertaking with a net turnover exceeding EUR 200,000,000 in the preceding financial year; or (ii) where the branch generated a net turnover exceeding EUR 200,000,000 in the preceding financial year.

These thresholds apply for financial years beginning on or after January 1, 2028 (Article 5, CSRD).

Small and medium-sized undertakings are now out of scope.

The entities that are in scope of the revised CSRD need to include in a dedicated section in their management report on information necessary to understand both the company’s impact on sustainability matters; and (ii) how sustainability matters affect the company’s development, performance and position (the ‘double materiality principle’).

2. Reform of the ESRS

CSRD requires certain undertakings to report sustainability information in accordance with mandatory European Sustainability Reporting Standards (ESRS). In July 2023, the European Commission adopted the first set of ESRS. To deliver on the simplification and streamlining of sustainability reporting, the Omnibus I Directive requires the European Commission to adopt a delegated act to revise the first set of ESRS in order to substantially reform ESRS by:

(i) removing datapoints deemed least important for general purpose sustainability reporting;

(ii) deleting sector-specific reporting standards (the first set of such standards were to be adopted by June 30, 2026) to avoid an increase in the number of prescribed datapoints that undertakings are required to report;

(iii) including a provision that where an undertaking manages investments subject to a fiduciary duty on behalf of its clients pursuant to a mandate agreed with those clients without retaining risks or rewards of ownership, that undertaking is not expected to (i) assess the impacts, risks and opportunities related to those investment nor (ii) provide data on those investments;

(iv) prioritising, to the extent possible, quantitative datapoints over narrative text;

(v) further distinguishing between mandatory and voluntary datapoints;

(vi) providing clear instructions on how to apply the materiality principle in order to ensure that undertakings are only required to report material information and to reduce the risk that assurance service providers inadvertently encourage undertakings to report information that is not necessary or dedicate excessive resources to the materiality assessment process;

(vii) improving consistency with other pieces of Union legislation, including financial services legislation; and

(viii) taking account, to the greatest extent possible, of interoperability with global sustainability reporting standards.

On July 3, 2026, the European Commission adopted the delegated act to further revise the ESRS.⁸ The delegated act has been submitted to the European Parliament and the Council for scrutiny. The measures will apply once the two‑month scrutiny period, which can be extended by a further two months, has ended. At the time of writing, the delegated act is not yet in force and has not been published in the OJ.

Undertakings must use the revised ESRS from financial year 2027, but may choose to use them from financial year 2026. The revised ESRS reduce the number of mandatory datapoints by approximately 60%.

3. Exemptions from Reporting Obligations

CSRD as amended also recognises that there are circumstances in which undertakings should, subject to assurance, be permitted to omit certain information when applying sustainability reporting requirements. Such circumstances include:

(i) where the disclosure of sustainability information could seriously prejudice the commercial position of an undertaking;

(ii) where the information corresponding to intellectual capital, intellectual property, know-how, technological information or the results of innovation that would qualify as a trade secret;

(iii) where the information is “classified” information; and

(iv) where there might be information that should be kept confidential for reasons not relating to commercial prejudice, trade secrecy or classification.

4. Value chain reporting

Pursuant to CSRD, undertakings are to report information about their own operations and about their value chain. The recitals to the Omnibus I Directive note that there is evidence that undertakings in the value chain, including small and medium-sized enterprises, receive disproportionate requests for information from reporting undertakings. Accordingly, CSRD has been amended to introduce protections for undertakings in the value chain that do not exceed the average number of 1,000 employees during the preceding financial year to limit the mandatory reporting burden for those undertakings (the ‘protected undertakings’).

On July 3, 2026, the European Commission adopted a delegated act establishing a voluntary reporting standard⁹ to provide a standardized more limited reporting framework (i) for those undertakings not subject to mandatory sustainability reporting requirements but who may want to undertake voluntary reporting (for example, because reporting will facilitate access to sustainable financing and help them to understand and monitor their own sustainability performance); and (ii) for protected undertakings that are required to report because they are in the value chain of companies that themselves are subject to mandatory sustainability reporting (‘reporting undertakings’). Reporting undertakings may only require the protected undertakings in their value chain to provide the reporting covered by the voluntary reporting standards. Reporting undertakings which choose to request information exceeding those limits are required to ensure that protected undertakings are informed of which extra information is requested and of their statutory right to decline to provide it.

The delegated act has been submitted to the European Parliament and the Council for scrutiny. The measures will apply once the two‑month scrutiny period, which can be extended by a further two months, has ended. At the time of writing, the delegated act is not yet in force and has not been published in the OJ.

The provisions in the delegated act relating to the value chain cap will apply from the financial years beginning on or after January 1, 2027. To enable undertakings not subject to the mandatory sustainability reporting to benefit from this voluntary sustainability reporting standard as soon as possible, the delegated act applies from the date of entry into force to protected undertakings that wish to report on sustainability on a voluntary basis.

Relatedly, the Omnibus I Directive provides that reporting undertakings should be able to rely on a self-declaration issued by undertakings in their value chain for the purpose of determining the size of those undertakings. No further verification by the reporting undertaking should be necessary.

5. Auditing and Assurance

The Omnibus I Directive does not change the requirement for Member States to ensure that statutory auditors and audit firms carry out the assurance of sustainability reporting. However, the European Commission’s deadline to adopt a limited assurance standard via delegated act has been deferred to July 1, 2027 from October 1, 2026. In light of the change in the scope of undertakings subject to sustainability reporting requirements, the Omnibus I Directive has simplified the approval requirements for auditors responsible for auditing sustainability reports. The Omnibus I Directive removes the potential for a progression to requiring reasonable assurance of sustainability reporting.

CSDDD

With regard to the CSDDD, the main amendments contained in the Omnibus I Directive are:

• an extension of the transposition deadline to July 26, 2028, and with all companies required to comply by July 26, 2029, and to publish disclosures required under CSDDD by January 1, 2030 (there are no phased deadlines for compliance);
• significantly higher thresholds for companies in scope of CSDDD;
• significantly higher threshold for turnover generated in the EU by non-EU companies;
• increased harmonisation, with prohibitions against Member States diverging from most of the key provisions;
• that climate transition plans are no longer a requirement;
• the cap on fines has been lowered to 3% of net worldwide turnover;
• the removal of the requirement that, as a measure of last resort, companies terminate the business relationship if it is not possible to prevent or mitigate potential adverse impact;  
• the deletion of the obligation for the European Commission to submit “no later than July 26, 2026” a report to the European Parliament and to the Council on whether additional sustainability due diligence requirements tailored to regulated financial undertakings with respect to the provision of financial services and investment activities should be required; and
• the removal of the EU-wide civil liability mechanism. 

Conclusion

The changes introduced by the Omnibus I Directive are a positive development and evidence the EU’s commitment to simplifying and reducing the burden of reporting associated with sustainability matters.