EU Reaches Agreement on Omnibus Procedure for Sustainability Reporting

After months of negotiations, the EU reached an agreement on December 16, 2025, regarding the directive amending the requirements for sustainability reporting and corporate due diligence. The new directive is part of the Omnibus-I package presented on February 26, 2025, and makes extensive adjustments to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The overarching goal of the Omnibus Initiative is to strengthen European competitiveness by reducing bureaucracy. The political direction is clear: the Anwenderkreis is significantly narrower and the scope of reporting obligations is considerably reduced.

CSRD: Restriction of the Anwenderkreis and further relief

The Anwenderkreis of the CSRD is significantly restricted by the adopted amending directive. In the future, only companies will be subject to the mandatory CSRD sustainability reporting that employ more than 1,000 people on average per year and have a net annual turnover of more than €450 million These new thresholds apply uniformly to individual companies and groups, regardless of their capital market orientation, as well as to banks and insurance companies. As before, mandatory reporting also includes the reporting according to Article 8 of the EU Taxonomy Regulation, to which the amending directive now adopted cannot make any content changes, but whose Anwenderkreis is linked to the CSRD.

Capital market-oriented SMEs (previously “Wave 3”) are therefore completely exempt from the reporting obligation, and a large proportion of the previous “Wave 2 companies” (large companies under accounting law that were not already covered by the Non-Financial Reporting Directive) are no longer covered by the new Anwenderkreis. Overall, the previous Anwenderkreis will be reduced by around 90% as a result of the adjustments.

Even capital market-oriented companies that, as “Wave 1 companies,” were already subject to the CSRD reporting obligation from the 2024 financial year (subject to national implementation) no longer have to submit a sustainability report from the 2027 financial year if they do not meet the new size criteria. Member States have the option to exempt these companies from the application in the national implementation of the directive for the 2025 and 2026 financial years.

Since the CSRD has not yet been transposed into national law in Germany and this will no longer take place before December 31, 2025, the NFRD still applies here. Capital market-oriented companies with more than 500 employees must continue to submit only a non-financial statement in accordance with Section 289c HGB for the 2025 financial year. It is expected that the CSRD in its amended version will be transposed into German law in the course of 2026 and that the CSRD reporting obligation for companies previously subject to the NFRD (subject to the option of excluding companies that do not meet the new size criteria) will therefore apply for financial years beginning on or after January 1, 2026. All other companies subject to reporting obligations according to the new thresholds must submit a CSRD-compliant sustainability report from the 2027 financial year (reporting in 2028).

A legal protection for smaller companies in the value chain is also being introduced.. Companies with up to 1,000 employees have an explicit right to refuse further sustainability information, provided that it goes beyond the scope of the voluntary reporting standards applicable to non-reporting companies in the future – this voluntary standard will be based on the VSME standard developed by EFRAG and is expected to be adopted as a delegated act within 2026. Larger reporting companies may not contractually enforce or factually require such information in the future. The legislator is thus reacting to the frequently criticized transfer of reporting obligations along the supply chain (so-called “trickle-down effect”).

The CSRD is also being relaxed with regard to the depth of the audit: The content audit of the sustainability report must only be carried out with limited assurance in the future . The originally planned introduction of a mandatory audit with reasonable assurance is completely eliminated.

ESRS: Simplification of Set 1 and deletion of sector-specific standards

As before, the European Sustainability Reporting Standards (ESRS) as the central framework for sustainability reporting will continue to be mandatory for CSRD-reporting companies.

As part of the Omnibus-I package, the currently valid Set 1 of the ESRS from July 31, 2023, will be extensively revised. In March 2025, the EU Commission commissioned the European Financial Reporting Advisory Group (EFRAG) with the streamlining and simplification of the standards . On December 3, 2025, EFRAG finally published the final ESRS drafts, the result of the extensive revision phase characterized by an intensive stakeholder dialogue. The EU Commission will now use the drafts as a basis for preparing a delegated act to amend the current ESRS. According to the amending directive, the EU Commission must adopt this within six months of the entry into force of the now adopted amendments to the CSRD, i.e. by mid-2026. A more in-depth classification and explanation of EFRAG’s final ESRS drafts can be found in our series of articles.

Furthermore, the amending directive eliminates the EU Commission’s obligation to issue sector-specific standards by June 30, 2026, at the latest. Originally, it was planned that companies would have to supplement the extensive cross-sector Set 1 data with further sector-specific data in the future – the deletion therefore goes hand in hand with a significant reduction in the scope and effort of reporting. Nevertheless, even according to the final ESRS drafts, there is still an obligation to define and disclose company-specific information if the ESRS data points do not adequately cover the impacts, risks, and opportunities identified as material. The amending directive also proposes that the EU Commission could support companies in the future in applying the ESRS for certain sectors by providing sector-specific guidelines based on consultations with the relevant stakeholders.

CSDDD: Focus on the largest market players

The CSDDD is also being fundamentally realigned by the amending directive. The thresholds for the obligation to fulfill due diligence obligations are rising to 5,000 employees and €1.5 billion in worldwide turnover, so that only very large companies and groups fall within the Anwenderkreis. The start of the application for all affected companies will be uniformly postponed to July 26, 2029.

In terms of content, the risk-based approach is strengthened. In the future, companies must focus their due diligence obligations more on those areas in which serious and probable risks exist. The obligation to implement a climate transition plan is completely eliminated. Also the originally EU-wide planned uniform civil liability regulation is deleted. Fines are limited to a maximum of 3% of worldwide turnover across the Union.

What happens next?

The amending directive will enter into force twenty days after its publication in the Official Journal of the EU. This is expected to take place at the beginning of 2026. After entry into force, the Member States have 12 months to transpose the directive into national law. An exception to this is the amendments to the CSDDD – at this point, the Member States are given time until July 26, 2028, for implementation. The amending directive also contains a review clause regarding a possible future expansion of the scope of both the CSRD and the CSDDD.

Classification and recommendations for action

With the Omnibus-I package, the EU is making a clear change of course in sustainability regulation. The obligations are not abolished, but are much more focused, risk-based and concentrated on (very) large companies. For many companies, this means a noticeable relief in the short term. In the medium and long term, however, sustainability remains a decisive factor for financing, supply chain management and market access – even beyond formal reporting obligations.

Even non-reporting companies should therefore address the expectations of their stakeholders, in particular capital market players such as investors or lenders, and consider voluntary reporting. On the basis of the VSME standard, it is already possible to start setting up corresponding reporting processes.

For companies that will continue to be subject to the reporting obligation in the future, it is recommended that they deal intensively with the new ESRS. Although these are not expected to be published as a delegated act until mid-2026, companies should by no means remain inactive until then. Early preparation of mandatory reporting on the basis of the final ESRS drafts submitted to the EU Commission makes it possible to adapt or set up the reporting processes without time pressure and to pilot them in a test report for the 2026 financial year. The starting point is the double materiality assessment, which should be updated on the basis of the new clarifications from the ESRS or – if this has not yet been done – carried out as quickly as possible in order to determine the reporting content. In this context, regular coordination with the auditor is recommended. In this way, companies not only ensure regulatory compliance. Rather, sufficient time remains available to strategically use the findings to develop targeted concepts, measures and goals – a contribution to “living sustainability” and at the same time to maintaining long-term competitive security.