The EU has reached an agreement on Omnibus 1 – what are the key changes to CSDDD and CSRD?
Charlotte Kincaid
Senior ESG Policy Manager
15 Jan 2026
About 4 mins
On 16 December the European Parliament voted in favour of the final Omnibus agreement, cementing significant rollbacks to key EU sustainability regulations – the CSDDD (Corporate Sustainability Due Diligence Directive) and the CSRD (Corporate Sustainability Reporting Directive).
What is the EU Omnibus?
The EU Omnibus I Package, introduced by the European Commission on 26 February 2025, aims to reduce regulatory burdens for businesses by modifying or rolling back several EU corporate sustainability requirements.
What happens next?
With trilogue negotiations concluded and Parliament endorsing the final report, the text now needs formal approval from the Council. The Directive will enter into force 20 days after its publication in the Official Journal. EU Member States are required to transpose the Directive into their national laws by 26 July 2028.
What’s staying the same?
- Risk-based due diligence: The principle is upheld, allowing businesses to focus on the most severe and most likely risks across their chain on activities – instead of limiting to tier 1 suppliers, a proposal that was put forward in the European Commission’s position.
- Double materiality principle: Companies within the scope of the CSRD are still required to report from a double materiality perspective. This means they must disclose both how sustainability issues affect their performance and how their activities impact society and the environment.
What are the key changes?
Corporate Sustainability Due Diligence Directive (CSDDD)
- Reduced scope: the CSDDD will now only apply to the very largest companies – 5,000 employees and EUR 1.5 billion net turnover, cutting coverage by ~70%.
- Postponement: The first phase of due diligence requirements for large companies is delayed to 26 July 2029. Guidelines will be provided by July 2027 to help companies prepare.
- Risk-based rather than tier-based approach to due diligence: The agreed text is more closely aligned with the principle of risk-based due diligence enshrined in “soft law” – such as the UN Guiding Principles on Business and Human Rights. When addressing risks, companies can focus on the areas of their chains of activities where adverse impacts are most severe and most likely to occur. Such assessments should be informed by reasonably available information.
- Restrictions on information requests to suppliers: Requesting information from suppliers with less than 5,000 employees should be a last resort and only if the information can’t be sourced from elsewhere, such as through third party datasets and research reports.
- Assessment frequency: Every five years instead of annually.
- Stakeholder engagement requirements minimised: Stakeholder engagement is streamlined, and the obligation to terminate business relationships as a last resort is removed.
- Civil liability: EU civil liability conditions are removed, leaving national laws to define liability.
- Climate transition plan: removed from the CSDDD.
- Harmonisation: More due diligence provisions are harmonised to ensure a level playing field across the EU. For example, penalties are capped at 3% of global turnover.
- Exclusion of financial services: The review clause on including financial services in due diligence requirements is deleted.
Corporate Sustainability Reporting Directive (CSRD)
- Narrower scope: Only large companies (+1,000 employees, turnover above €450 million), reducing coverage by ~85%.
- Limiting regulatory overspills for suppliers: introduces protections for businesses with fewer than 1000 employees, or “protected undertakings”. Protected undertakings have the right to decline to provide information exceeding the information specified in the voluntary reporting standards, known as VSME.
- Postponement by two years: Postponing the reporting requirements deadline for large companies that haven’t yet started reporting yet.
- Exemption for ‘wave 1’ companies: The final agreement includes a Member State option to exempt ‘wave 1’ companies from their reporting obligations for 2025 and 2026.
- Limited assurance only: Only limited assurance is mandated, with no transition to reasonable assurance.
- ESRS Simplification: Data points reduced from 1,073 to 320 (70% cut), with clearer guidance on double materiality and flexibility for undue cost or effort.
- Sector-specific standards: Removed; guidance may follow later.
- Voluntary reporting: For the companies that will no longer be in the scope of the CSRD the EU Commission will create a delegated Act for a voluntary reporting standard, based on the standard for smaller businesses (VSME) developed by the European Financial Reporting Advisory Group (EFRAG). These standards will be reviewed every 4 years to ensure they remain fit for purpose.
There are elements of the law which will be reviewed in the coming years to ensure they remain fit for purpose:
- Scope: Potential expansion for both CSRD and CSDDD.
- Civil liability: Review on civil liability in CSDDD planned for 2031.
What are the positives takeaways?
After a year of uncertainty, businesses now have clarity on scope and expectations, enabling them to begin compliance preparations. Key benefits include:
- Extended compliance deadlines provide an opportunity for businesses to prepare adequately and go beyond a tick-box approach.
- Reducing regulatory overspill for SME suppliers.
- Simplified ESRS standards, cutting mandatory data points and improving accessibility for CSRD-aligned reports.
Despite these changes, CSRD and CSDDD remain landmark regulations with significant requirements for large businesses, and other countries continue to follow the EU’s lead on mandatory due diligence.
Act now to leverage these regulatory changes to your advantage.
Contact our team today to help you navigate these evolving requirements while maintaining your competitive edge in ESG performance.
Book a free consultation to discuss how these changes can benefit your business operations and sustainability reporting approach.
