Provisional Agreement on Updated Sustainability Reporting and Due Diligence Rules

EU institutions are moving closer to finalising significant changes to the sustainability reporting and due diligence framework. The Omnibus I package, designed to streamline existing obligations and reduce administrative burdens, has progressed rapidly following recent political agreement and the publication of the consolidated legal text.

The European Parliament and the Council have continued to advance the provisional agreement on simplified sustainability reporting and due diligence rules for companies, presented as part of the Omnibus I simplification package. Following the initial announcement on 9 December 2025, subsequent confirmation and procedural steps at Council level have strengthened the legislative trajectory of the agreement.

Scope Adjustments and Cost Reductions

Under the revised Corporate Sustainability Reporting Directive (CSRD), the scope will apply to companies with more than 1 000 employees and an annual net turnover of at least €450 million. For the Corporate Sustainability Due Diligence Directive (CSDDD, also referred to as CS3D), the scope will cover undertakings with more than 5 000 employees and a net turnover of at least €1.5 billion. These thresholds substantially narrow the range of affected companies compared with earlier proposals.

During a joint press conference in the European Parliament on 9 December 2025, JURI rapporteur Jörgen Warborn and Danish Minister for Industry, Business and Financial Affairs Morten Bødskov presented updated estimates on the impact of the revised scope. These suggest that around 85% of undertakings originally expected to fall under CSDDD will now remain outside the revised scope, while, according to the Danish Presidency, approximately 80% of Danish companies initially covered by CSRD obligations will no longer be in scope. In practice, the new regime focuses regulatory obligations on a relatively small number of very large companies with the greatest leverage over their value chains.

The agreement continues to be framed as a major simplification effort aimed at reducing administrative burdens. The European Commission’s original proposal estimated that the Omnibus I package could deliver annual reductions in sustainability reporting costs of around €4.5 billion. The final compromise goes further by introducing additional relief measures, including a specific exemption for certain financial holding undertakings, clarified group-level exemptions for subsidiaries, and the decision to retain limited assurance on sustainability information rather than moving towards a more onerous full audit or reasonable assurance standard in the near term.

Changes to Climate Transition Plans and Due Diligence Requirements

Under CSRD, the language on climate transition plans remains unchanged compared with the Commission’s proposal. By contrast, under CSDDD the requirement for in-scope companies to adopt a climate transition plan has been fully removed. This outcome aligns with the European Parliament’s negotiating mandate and is explicitly intended to alleviate compliance costs and complexity for businesses.

The due diligence process described in Article 8 has been refined to focus on identifying the most severe actual and potential risks, using reasonably available information. Companies will not be required to perform exhaustive mapping of every business partner across their value chains. Instead, they are expected to concentrate due diligence efforts on those parts of their chains of activities where adverse impacts are most likely to occur or most severe, thereby reducing unnecessary trickle-down reporting demands on smaller entities.

Penalties, Threshold Adjustments and Reporting Requirements

Under CSDDD, penalties have been set at a maximum level of 3% of an undertaking’s net worldwide turnover, with further guidance to be issued by the Commission and member states. The implementation timeline has been extended by an additional year, with the transposition deadline postponed and corresponding application dates for companies pushed back accordingly.

On the reporting side, the revised text empowers the Commission to adjust net turnover thresholds for sustainability reporting through delegated acts in order to take account of inflation over time. In addition, a review clause requires the Commission to report every five years on the implementation and effectiveness of CSDDD and, where appropriate, to propose legislative changes, including in relation to the directive’s scope.

For undertakings within scope of CSRD, the updated provisions confirm that they must disclose information on key intangible resources and explain how their business model and value creation depend on those resources. This aligns the existing intangible-related reporting requirements with the new, narrower scope of the directive.

To support consistent and efficient reporting processes, a digital portal for sustainability reporting will be established under CSRD, providing companies with access to reporting templates and guidance on EU and national requirements. In practice, this will function as a one-stop shop for sustainability reporting tools.

Economic and Procedural Context

The broader context of the agreement is firmly centred on improving EU competitiveness. The Danish Presidency has consistently framed the Omnibus I package as a response to mounting global competitive pressures and to concerns that complex regulatory requirements, particularly in the area of sustainability, may be diverting resources away from innovation and green investment. By narrowing the scope and simplifying the reporting and due diligence framework, the co-legislators aim to free up capacity for companies to focus on their core business and on strategic investments in the green transition.

On 10 December 2025, the Permanent Representatives Committee confirmed the provisional agreement and authorised the transmission of a formal letter to the European Parliament’s Legal Affairs Committee (JURI). In that letter, the Council indicates that it will adopt the act if Parliament approves the agreed text at first reading. The Council has also published the final legal text of the Omnibus I in the same document. After the vote in the JURI Committee, the file is expected to move to the Parliament’s plenary in Strasbourg on 16 December. If approved there, the Omnibus I package will be formally adopted and will become EU law following publication in the Official Journal, after which it will need to be transposed into national law.