On 24 February 2026 the Council of the European Union gave its final green light to the Omnibus I simplification package, dramatically narrowing the scope of the EU’s corporate sustainability reporting (CSRD) and due diligence (CS3D/CSDDD) rules. The move, adopted after the European Parliament’s approval in December 2025, will come into force 20 days after publication in the EU’s Official Journal.

 

What changed?

The final agreement goes far beyond the Commission’s original 2025 proposal by raising thresholds and removing obligations:

 

Regulation	Previous scope	New scope	Other changes
CSRD (Corporate Sustainability Reporting Directive)	Applied to EU companies with >250 employees	Now applies only to companies with >1 000 employees and >€450 million net annual turnover. Third country undertakings fall under the rules only if the EU parent generates >€450 million and the subsidiary or branch >€200 million in turnover.	Transitional exemptions remove “wave one” companies (those that started reporting in 2024) from scope in 2025–26.
CS3D/CSDDD (Corporate Sustainability Due Diligence Directive)	Draft had a 1 000 employee threshold	The final text raises this to 5 000 employees and €1.5 billion net turnover. Only large firms with the biggest value‑chain influence remain covered.	The obligation to prepare climate transition plans is removed; the EU‑wide liability regime is dropped; penalties are capped at 3 % of global revenue. Compliance is delayed: member states must transpose by 26 July 2028, and companies must comply by July 2029.

 

These changes mean that roughly 90 % of companies formerly covered by the CSRD may fall out of scope, and only very large companies will be captured by the CS3D. The Council argues that the package reduces “unnecessary barriers, cuts red tape” and boosts EU competitiveness.

 

Why this matters

1. Regulatory relief, not a green light to ignore sustainability. Fewer companies will be legally required to report, but investor, customer and employee expectations for credible sustainability disclosures are not disappearing. Transparency remains a differentiator.
2. Competitive positioning. Firms that continue to disclose voluntarily will likely be better positioned when clients ask about ESG practices or when banks and insurers integrate sustainability into risk assessments. Simplification can free up resources to improve actual performance, not just reporting.
3. Narrower due‑diligence obligations. Under the CS3D, companies may focus on the parts of their value chain where impacts are most likely, prioritising direct business partners and relying on “reasonably available information”. The removed climate‑plan requirement signals a shift toward flexible, risk‑based due diligence.
4. Longer runway. Companies still in scope have a year longer to prepare; member states’ transposition by July 2028 and compliance by July 2029 offer time to embed due‑diligence processes into procurement and governance.

What should companies do now?

Even if your organisation falls outside the new thresholds, sustainability remains a strategic driver. Here’s a suggested approach:

1. Assess your position. Map your headcount and turnover against the new thresholds to determine whether you remain in scope for CSRD or CS3D. Global groups should also check the rules for third‑country undertakings.
2. Stay proactive on reporting. If you no longer have to file under CSRD, consider using the voluntary sustainability reporting standard for SMEs (VSME) to maintain baseline disclosures. Stakeholders (e.g. customers, investors, lenders) will still expect evidence of responsible practices. Using a leaner standard can reduce friction for smaller suppliers while keeping you prepared for future regulatory shifts.
3. Refocus due‑diligence systems. For businesses still covered by CS3D, prioritise areas of the supply chain where actual or potential adverse impacts are most likely. Document your decisions, but avoid overly burdensome data‑gathering—smaller partners can refuse information beyond what the VSME specifies.
4. Use the extra time to build resilience. The delayed compliance date should be a window to integrate sustainability into strategy, procurement and risk management, not to postpone action. Identify material sustainability issues (e.g., energy use, process optimization, labor standards) and prioritize initiatives with a clear business case, energy efficiency, renewable energy contracts, logistics optimization. This ties sustainability directly to cost savings and resilience.
5. Engage stakeholders. These reforms may signal to boards that sustainability obligations are weakening, but many stakeholders (employees, communities, regulators in other jurisdictions) expect more, not less. Communicate your strategy, emphasising how sustainability drives innovation and competitiveness. A transparent narrative builds trust and positions you as the obvious choice when customers or investors evaluate partners.

Final thoughts

The Omnibus I package is a significant regulatory simplification. Yet it’s also a reminder that sustainability is evolving from a checkbox into a strategic choice. Companies that see this as an opportunity to streamline compliance while deepening genuine sustainability performance will be better placed to attract talent, access capital and earn stakeholder trust in the long term

 

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