On 16 December 2025, the European Parliament adopted revisions to the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), concluding negotiations on the Omnibus I package of simplification proposals related to this legislation.
The European Council had previously indicated its support for the amended text. Below is an overview of key changes and their implications for companies.
Key changes to the Corporate Sustainability Reporting Directive (CSRD)
Adjusted scope of application
The CSRD will now apply to:
EU companies with an annual average of more than 1,000 employees and net turnover exceeding €450 million on a standalone or consolidated basis. Companies not already reporting will be required to report from 2028 on their 2027 financial year.
Non-EU groups who have an EU branch or subsidiary exceeding €200 million in net turnover and the group has generated more than €450 million in consolidated net turnover in the EU. There is no headcount requirement for non-EU groups. Such companies will be required to report from 2029 on their 2028 financial year.
Exemptions apply for financial holding companies and listed subsidiaries, although companies that are no longer in scope may still choose to report on a voluntary basis with simplified disclosures.
A five-year review clause has been introduced to adjust thresholds for inflation. EU Member States may choose exempt companies that were previously in scope for the 2024 financial year but fall outside under the new thresholds from reporting obligations for the 2025 and 2026 financial years.
Removal of sector-specific reporting standards
The requirement for the European Commission to publish sector-specific reporting standards has been removed. However, the recitals of the final Omnibus I text allow for sector-specific guidelines to be developed in connection with the European Sustainability Reporting Standards (ESRS) if required.
Simplified ESRS
Revised, simplified ESRS must be adopted by the European Commission no later than six months after the new Directive enters into force, which is expected to be in early 2026.
On 3 December 2025, EFRAG submitted the revised ESRS as a technical recommendation to the European Commission, which will evaluate these revised proposals and make any necessary adjustments.
Limiting information requests to value chain partners
To reduce the indirect burden on companies that are not in scope of the directives, a ‘value chain cap’ has been introduced. This limits what information in-scope companies can request from their value chain partners.
Companies with 1,000 or fewer employees that are part of the value chain of a reporting company are defined as “protected companies” and cannot be required to provide information beyond what is included in a forthcoming voluntary reporting standard, based on the Voluntary Sustainability Reporting Standard for non-listed Micro, Small and Medium Enterprises (VSME). Protected companies also have the right to refuse any requests that exceed this scope.
No transition to reasonable assurance
There are no longer any provisions requiring the European Commission to consider transitioning to reasonable assurance, meaning that the previously expected upgrade from limited assurance will no longer be mandatory. By 1 July 2027, the European Commission will develop uniform standards for limited assurance audits and adopt them as a delegated act.
Digital support for sustainability reporting
In order to ensure that all companies have access to information on the application of voluntary and mandatory sustainability reporting standards, the European Commission will establish a dedicated portal to provide information, guidance, and support services. The portal will link to online support measures offered by Member States, where available, in order to take account of national specificities.
Key changes to the Corporate Sustainability Due Diligence Directive (CSDDD)
Adjusted scope of application and timeline
The CSDDD’s scope has been reduced and now applies to:
EU companies or groups with more than 5,000 employees and a net turnover exceeding €1.5 billion.
Non-EU groups generating more than €1.5 billion in turnover within the EU.
The final amended draft introduces a review clause requiring the European Commission to reassess the directive’s scope and consider sector-specific approaches for high-risk sectors starting July 2031 and every five years thereafter. The implementation deadline has been postponed by one year to 26 July 2029, providing in-scope companies with additional time to prepare.
New developments in the identification and assessment of risks
The amended CSDDD maintains the requirement under Article 8 for Member States to ensure that companies take appropriate measures to identify and assess actual and potential adverse impacts arising from their own business activities, those of their subsidiaries and, where relevant, those of their business partners within the value chain. However, the amended text introduces several important refinements.
First, the amendments clarify that companies should take into account a broad set of relevant risk factors such as the business partner’s corporate structure, geographic context, law enforcement, and industry-specific circumstances when conducting their risk analysis. Based on available information, companies should begin with a scoping exercise to determine the areas where adverse impacts are most likely and most severe. This replaces the previous concept of “mapping” and is intended to provide a focused, risk-based starting point. In identified high-risk areas, an in-depth analysis must then be carried out to comprehensively assess actual and potential impacts.
Second, to curb the so-called "trickle-down effect", similar to the changes under the CSRD, companies should rely on publicly available or existing information rather than requesting information from their business partners. Information requests may only be requested where necessary for further analysis of significant risks. Business partners with fewer than 5,000 employees may only be asked for information in exceptional cases.
Additional clarifications include
Prioritisation: Where prioritisation occurs, failure to address a less significant adverse impact will not, in itself, expose the company to penalties.
Last resort suspension: Language referring to “termination” has been removed, with adjustments clarifying that suspension should be considered only as a last resort.
Periodic assessment: Companies must conduct a reassessment at least every five years, rather than annually.
These adjustments maintain the principle of a risk-based approach to due diligence, while regulating information gathering practices.
Additional adjustments and deletions include
Narrowed stakeholder definition: The definition of “stakeholder” has been narrowed to employees of the company, its subsidiaries and business partners, their trade union and employee representatives, and individuals and communities that may be directly affected by products, services and operations, including their representatives. It excludes stakeholder groups such as consumers, employees of business partners, national environmental and human rights institutions, scholars and civil society organisations.
Clarification of risk factors: The term “risk factors” has been clarified to include whether the business partner is not subject to comparable legislation, geographic and contextual considerations such as the level of law enforcement and sector-specific factors relating to operations, products and services.
Removal of Climate Transition Plan: The requirement for a climate transition plan has been removed from the CSDDD, however companies in-scope of the CSRD must continue to disclose information on their transition plans or, if no such plans exist, indicate whether and when they intend to adopt such plans.
Liability and sanctions:Regarding liability and sanctions, the CSDDD no longer provides for specific EU-wide liability. Instead, Member States are required to establish penalties that are effective, proportionate, and dissuasive. A uniform upper limit for fines has been set at 3% of global net turnover, and the European Commission, together with Member States, will develop guidelines to determine penalties and ensure consistent enforcement practices across the EU.
How will the changes to CSRD and CSDDD affect businesses?
What are the current implications for companies?
The conclusion of the Omnibus simplification process provides companies with greater clarity and planning certainty, with the key parameters now clearly defined.
While formal national implementation timelines may vary, companies should promptly check whether they still fall within the scope of the CSRD and/or CSDDD under the new thresholds and identify any applicable exemptions or reliefs.
For CSRD, national implementation is expected within 12 months of the directive’s entry into force, currently anticipated for January 2027. For CSDDD, the implementation deadline has been set for 26 July 2028.
For companies that are still subject to mandatory reporting requirements, the focus is now shifting to preparing content for the simplified ESRS and adapting existing processes, particularly relating to materiality assessment and value chain analysis.
At the same time, companies outside the mandatory regime may still wish to consider voluntary reporting as a strategic tool to meet stakeholder expectations or respond to information requests from business partners, investors and lenders. The focus is shifting from the question of "whether" to "how" to implement efficient, risk-based, and strategically embedded sustainability reporting and due diligence obligations in the UK.
What does the current situation mean for companies in the UK?
In parallel, developments in the UK signal a shift toward more stringent human rights’ due diligence requirements.
On 16 December 2025, the UK Independent Anti-Slavery Commissioner published a proposed law based on the ‘failure to prevent’ model seen in other UK legislation. Under this proposal, where a serious human rights harm occurs and a company is involved, whether by causing, contributing to, or being directly linked to that harm - the company would be deemed responsible unless it can prove that it conducted ‘reasonable due diligence’.
The proposed law introduces both civil and criminal liability, alongside a forced labour import ban, prohibiting the export, import or sale of products made with or transported using forced labour. Additionally, UK companies would be required to publish an annual human rights statement, replacing the current Modern Slavery Act reporting requirements.
In terms of reporting, progress on the UK Sustainability Reporting Standards (SRS) continues. Following consultation, endorsed standards were expected in late 2025 however, the Department for Business and Trade now anticipates publication in February 2026 to incorporate amendments aligned with the International Sustainability Standards Board (ISSB) finalised standards and to reflect relatively minor changes where issues were raised by UK stakeholders during consultations in 2025.
Overall, companies should begin planning now to assess their position, plan for compliance and leverage these changes as an opportunity to strengthen transparency and build resilience in their sustainability and human rights practices.
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