On 16 December, the European Parliament approved the provisional agreement on the Omnibus I package reached with the Council of the European Union, significantly reducing the number of companies in Europe required to report against the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) rules.

Corporate sustainability reporting

Under the updated Directives, EU companies employing over 1,000 employees on average, with a net annual turnover of €450m, will now have to carry out reporting. It also applies to non-EU companies that make more than €450m and to their subsidiaries and branches generating more than €200m turnover in the EU. Listed SMEs are no longer in scope.

Reporting requirements have been simplified, with sector-specific reporting now voluntary. Crucially, firms that are not in scope will not have to provide information to bigger partners within their supply chains beyond that which is included in voluntary reporting standards. 

Companies that were previously in ‘Wave one’ for the reporting requirements that now fall out of scope will not need to report for the 2025/26 financial year. A review clause has been included to leave open the possibility of future re-expansion.

Due diligence obligations

CSDDD rules will only apply to very large corporations: only those with more than 5,000 employees and €1.5bn turnover or more. This also applies to non-EU companies earning above the same turnover threshold in EU countries. Due diligence reporting now focuses on critical risks, with general scoping replacing full mapping. In scope companies should only ask for information from smaller business partners when information needed for an in-depth assessment cannot be gathered in any other way.

Requirements for climate transition plans have been removed from the Directive. Penalties for non-compliance have been capped at 3% of global turnover. The rules will come into full effect from 26 July 2029, with 2028 acting as a transition period. 

"Parliament has listened to the concerns expressed by job creators across Europe,” Rapporteur of the Legal Affairs Committee Jörgen Warborn (EPP, SE) said. “Backed by a broad majority, today’s vote delivers historic cost reductions while keeping Europe’s sustainability goals on track. This is an important first step in the ongoing efforts to simplify EU rules.”

Actions for non-EU businesses

Non-EU businesses that do business within the EU should check whether they meet the scope of CSRD and CSDDD, and should be looking at how to report against the requirements.

Ravi Abeywardana, Director of Sustainability - Reporting and Assurance at ICAEW, said: “Companies preparing for both the CSRD and the International Sustainability Standards Board (ISSB) standards should adopt an approach to consider planning to disclose against both. For example, in the UK, we expect the UK Sustainability Reporting Standards (UK SRS) to be published in the coming months for voluntary use.

“We expect these to be aligned with the ISSB standards, so companies in scope of CSRD intending to also apply UK SRS should consider planning for how to prepare for both frameworks together, identifying areas of overlap without obscuring material information.”