The European Union has officially approved the CSRD Omnibus package, marking a major shift in the region’s sustainability regulatory landscape. Following a vote by EU member states in the European Council, the agreement significantly scales back corporate obligations under the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).
For businesses navigating sustainability disclosure requirements, the decision signals a substantial recalibration of EU sustainability policy. While the new EU Omnibus Package reduces the number of companies subject to mandatory reporting, it also reinforces the importance of building internal sustainability expertise and developing robust business sustainability strategies to stay competitive in evolving markets.
The agreement represents the final legislative step after approval by the European Parliament in December. Once published in the EU’s official journal, the Omnibus regulation will enter into force 20 days later. Keep reading as we dive deeper into this news and what it means for businesses.
Why the EU introduced the CSRD Omnibus
The EU Omnibus Directive was initially proposed by the European Commission in early 2025 as part of a broader effort to simplify sustainability regulations and strengthen European competitiveness. Under the Commission’s original proposal, the CSRD would have been scaled back significantly by raising the employee threshold from 250 to 1,000 employees.
This change alone was expected to reduce the number of companies covered by CSRD reporting requirements by approximately 80 percent. The proposal also sought to simplify sustainability due diligence obligations under the CSDDD by narrowing the focus primarily to direct business partners, rather than entire value chains.
At the same time, the Commission aimed to limit the volume of sustainability data requests placed on smaller companies within corporate supply chains. However, negotiations between the European Parliament and the Council resulted in an even more extensive reduction of reporting obligations than initially proposed.
Strengthen sustainability reporting with practical, credibility-focused sustainability training
Major changes to CSRD sustainability reporting requirements
The newly approved EU Omnibus Package introduces stricter eligibility thresholds for companies subject to CSRD reporting. While retaining the 1,000-employee requirement proposed by the Commission, the agreement adds an additional financial threshold. Companies must now also generate at least €450 million in annual revenue to fall within scope of the regulation.
This dual threshold dramatically reduces the number of organisations required to comply with sustainability reporting standards, effectively removing an estimated 90% of companies from the CSRD reporting framework. The Omnibus agreement also includes new provisions limiting the data that large companies can request from smaller businesses in their supply chains.
Organisations with fewer than 1,000 employees will now be able to refuse reporting requests beyond the scope of the voluntary VSME sustainability reporting standard for SMEs. This measure aims to reduce administrative pressure on smaller businesses that have faced increasing ESG data demands from corporate customers.
Significant scaling back of due diligence obligations
The changes to the CSDDD are even more substantial. Under the revised Omnibus regulation, the scope of the CSDDD has been dramatically narrowed. Companies will now only fall under the regulation if they employ more than 5,000 people and generate at least €1.5 billion in annual revenue.
Additional revisions include:
- Removal of the requirement for companies to prepare climate transition plans
- Elimination of the EU-wide civil liability regime
- A cap on penalties at 3 percent of global revenues
- A one-year delay to implementation, with compliance now required by July 2029
The agreement also directs companies to rely primarily on reasonably available information rather than systematically requesting sustainability data from smaller suppliers across the value chain.
Competitiveness at the centre of the EU Omnibus reform
EU officials framed the reform as a necessary step to strengthen economic competitiveness while maintaining the EU’s sustainability ambitions. In a statement announcing the agreement, the Council emphasised that the EU Omnibus Directive aims to reduce regulatory complexity, cut administrative burdens, and provide greater flexibility for companies operating in a challenging geopolitical and economic environment.
Marilena Raouna, Cyprus’ Deputy Minister for European Affairs and representative of the current Council Presidency, said the agreement delivers on the EU’s commitment to “reduce unnecessary and disproportionate burdens on businesses” while maintaining targeted and proportionate rules.
Looking ahead: preparing for the next phase of sustainability reporting
The approval of the CSRD Omnibus marks a major recalibration of the EU’s sustainability regulatory framework. While mandatory sustainability reporting requirements are now significantly narrower in scope, the broader direction remains clear: transparency, ESG data, and responsible business practices continue to shape how organisations compete.
Large companies still require sustainability data from suppliers to meet their own reporting obligations. Financial institutions are also increasingly integrating environmental and social performance into lending decisions. As a result, sustainability reporting expectations are unlikely to disappear – even for companies outside the revised Corporate Sustainability Reporting Directive thresholds.
For businesses, the challenge goes beyond compliance now. It is about building the internal capability to manage sustainability data and reporting effectively. This requires practical understanding of sustainability reporting standards, ESG data management, and implementation frameworks that translate regulation into action.
At ISS, we provide practical sustainability education designed to help companies understand emerging regulations, implement reporting frameworks, and develop credible strategies. The EU regulatory landscape continues to evolve and organisations that invest in building their team’s capability will be best positioned to maintain supply chain access, strengthen resilience, and capture new opportunities.
The post CSRD Omnibus: EU gives final green light to scale back reporting appeared first on Institute of Sustainability Studies.
