Takeaways

• EU member states have approved the EU Omnibus Package, sharply reducing sustainability reporting and due diligence requirements for companies.
• Around 90% of companies will be excluded from the Corporate Sustainability Reporting Directive (CSRD) under the revised thresholds.
• The Corporate Sustainability Due Diligence Directive (CSDDD) has been significantly diluted, with higher thresholds, lower penalties, and delayed implementation.

EU member states have given their final approval to the EU Omnibus Package, a sweeping reform that scales back sustainability reporting and corporate due diligence rules across the bloc. The decision, adopted by the European Council on Tuesday, marks the last major step before the new law is formally enacted.

The move follows approval by lawmakers in the European Parliament in December and significantly reduces the scope of key sustainability regulations, including the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive.

The European Commission had first introduced the Omnibus proposal in early 2025 as part of a broader effort to simplify rules, cut red tape, and strengthen EU competitiveness. However, the final agreement goes much further than the Commission’s original plan.

Read More: Rifts in EU Omnibus: Lawmakers Put Chokehold on Green Rules

Under the revised rules, the CSRD will now apply only to companies with more than 1,000 employees and at least €450 million in annual revenue. This new revenue threshold was not part of the initial proposal. As a result, an estimated 90% of companies previously covered by sustainability reporting requirements will now fall outside the regulation’s scope.

Changes to the CSDDD are even more dramatic. The sustainability due diligence regulation will now apply only to companies with more than 5,000 employees and €1.5 billion in annual revenue. This sharply reduces the number of businesses required to assess and address environmental and human rights risks in their value chains.

In addition to narrowing the scope, lawmakers have removed several key obligations. Companies will no longer be required to prepare climate transition plans under the CSDDD. The agreement also eliminates the EU-wide civil liability regime and lowers the maximum penalty cap to 3% of global revenues.

Implementation of the CSDDD has also been delayed by one year. Companies that remain within its scope will now need to comply by July 2029.

The Omnibus agreement also limits how much information large companies can request from smaller businesses in their supply chains. Companies with fewer than 1,000 employees can refuse to provide reporting data beyond what is outlined in the voluntary sustainability reporting standard for SMEs (VSME). Firms covered under the CSDDD are instructed to rely primarily on reasonably available information rather than systematically requesting detailed disclosures from smaller partners.

EU officials defended the move as necessary to strengthen EU competitiveness in a challenging geopolitical environment. In a statement, the European Council said the package reduces complexity, cuts unnecessary barriers, and introduces more flexibility for companies.

Marilena Raouna, Cyprus’ Deputy Minister for European Affairs, said the agreement delivers on the promise of a more competitive European Union, with simpler and more proportionate rules for businesses and citizens.

Also Read: Sustainability Policy Split Widens Between U.S. and EU in 2025

With approval now secured from both legislative bodies, the updated act will be published in the EU’s official journal in the coming days and will enter into force 20 days after publication.

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Source: ESGtoday