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On 26 February 2026, the EU published Directive (EU) 2026/470 (the Omnibus I Directive). Adopted as part of the European Commission's (Commission) simplification agenda and after a year of debates and negotiations between the Commission, the Council, and the European Parliament, this text effectuates far-reaching changes to both the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D).
The Omnibus I Directive has finally been adopted and will enter
into force on 19 March 2026. The text substantially raises the
thresholds applicable to the Corporate Sustainability Reporting
Directive (CSRD) and the Corporate Sustainability Due Diligence
Directive (CS3D), limiting their application to the largest
companies only.
Key takeaway #2
Reporting standards are being overhauled to prioritize essential
quantitative information and reduce administrative burdens. Smaller
companies that are part of the value chain of reporting companies
will now benefit from a protective regime to preclude extensive
information requests.
Key takeaway #3
The most controversial provisions of the CS3D have been repealed
through a restructuring of due diligence obligations that provides
for seemingly less stringent information gathering requirements,
the removal of any requirements related to climate transition
plans, and the absence of a harmonized civil liability regime.
This is a major development, as these two pieces of legislation
are flagship texts of the EU's Green Deal. In short, the CSRD
requires certain companies operating in the EU to disclose detailed
information on their sustainability performance, while the CS3D
requires large companies to identify, prevent, mitigate, and report
on the actual and potential negative impacts of their activities on
human rights and the environment throughout their value chain.
However, as part of its efforts to increase competitiveness, the
EU is removing certain reporting and due diligence obligations.
Indeed, the stated objective of the Omnibus I Directive is to
reduce regulatory burdens, especially on small and medium
enterprises (SME), while preserving the core sustainability
ambitions of both instruments. To achieve this result, the EU
legislator has mainly decided to:
Reduce the scope of application so that fewer companies are
subject to the directives.
Streamline and simplify the required reporting and due
diligence obligations.
1. Reduced scope of companies falling under the CSRD
and the CS3D
The most spectacular change to the CSRD and the CS3D is
certainly the reduction in the number of companies affected by
reporting and due diligence obligations.
Initially, the CSRD was designed to apply gradually to different
types of companies: public-interest entities (wave 1), large
companies (wave 2), listed SMEs (wave 3), as well as subsidiaries
and branches of third country groups with a sufficient presence in
the EU (wave 4). The Omnibus I Directive puts an end to the wave-
and phased-implementation system. Only large companies that meet
significantly increased thresholds will be affected by
sustainability reporting. This directly affects the public-interest
companies that are currently subject to CSRD reporting
requirements. Companies in this category that do not meet the new
thresholds and are therefore not classified as large companies will
not be subject to reporting requirements for financial years
starting on or after 1 January 2027.
Regarding the CS3D, the thresholds have also been raised.
Initially, companies with more than 1,000 employees and an annual
global turnover exceeding €450 million were supposed to be
subject to CS3D requirements. But the Omnibus I Directive raised
those thresholds to companies with more than €1.5 billion net
worldwide turnover in the financial year and 5,000 employees on
average, as well as companies that have entered into certain
franchise or license agreements in the EU.
2. Streamlined and simplified reporting and due
diligence obligations
The second major change brought by the Omnibus I Directive
concerns the amount of information that companies will have to
report under CSRD. The revisions in this area are also meaningful
and have some stakeholders concerned that the streamlined reporting
requirements will diminish their efficacy marketwide. As previewed
in our last alert, the Commission aims at
simplifying the European Sustainability Reporting Standards (ESRS),
which define the specific information that companies subject to the
CSRD must disclose in their sustainability reports. The draft
simplified ESRS were published in December 2025, and
the Commission will adopt a final version of these ESRS within six
months. At the same time, the EU legislator is introducing a
"value-chain cap" designed to ease the administrative
burden on SMEs. Companies with 1,000 employees or fewer are no
longer bound to provide information to reporting companies that go
beyond the scope of "voluntary standards." The Commission
will develop the content of these "voluntary standards"
by 19 July 2026. Still, operators should expect these standards to
be limited to the most essential and readily accessible
information.
Similarly, the CS3D has been amended to reduce reporting
obligations and simplify due diligence obligations. First, where
possible, the Omnibus I Directive provides for an alignment of CS3D
and CSRD reporting standards. Second, the due diligence exercise
provided under the CS3D has been restructured to limit in part the
information requests made to business partners down the supply
chain.
We detail the main changes introduced by the Omnibus I Directive
to the CSRD and the CS3D in the tables below.
Main changes introduced by the Omnibus I
Directive
Topic
Omnibus changes to the
CSRD
Omnibus changes to the
CS3D
Applicability to EU
companies
The CSRD now applies to EU
companies with more than:
€450 million in net
turnover, and
An
average of 1,000 employees during the financial
year.
Public-interest companies that do
not meet the above threshold will not be subject to reporting
requirements for financial years starting on or after 1 January
2027.
The CS3D now applies to EU companies with more than:
€1.5 billion in net worldwide turnover in
the financial year, and
5,000 employees on average.
The CS3D now also applies to EU companies that entered into
franchising or licensing agreements in the EU:
For royalties thatexceeded €75
million in the last financial year, and
Worldwidenet turnover of €275
million in the last financial year (company or ultimate
parent company).
Applicability to non-EU
companies
The CSRD now applies to non-EU companies with more than
€450 million of net turnover generated in
the EU at group or individual level for each of the last two
consecutive financial years, and
€200 million of net turnover generated by
an EU subsidiary or a branch in the preceding financial year.
Public-interest companies that do not meet the above threshold
will not be subject to reporting requirements for financial years
starting on or after 1 January 2027.
The CS3D now applies to non-EU companies with more than:
€1.5 billion in net worldwide turnover in
the last financial year, and
5,000 employees.
(Same criteria as for EU companies)
The CS3D now also applies to non-EU companies entered into
franchising or licensing agreements in the EU:
For royalties thatexceeded €75
million in the financial year preceding the last financial
year, and
Net turnover of €275 million in the EU in
the year preceding the last financial year (company or ultimate
parent company).
Information requests to SMEs in the value
chain
Introduction of a "value-chain
cap."
When reporting companies are requested information within the
value chain for the purpose of their sustainability reporting,
companies with 1,000 employeesor
fewer ("protected undertakings") may
refuse to provide information beyond voluntary standards;
any contrary contractual clauses are rendered ineffective.
The content of the voluntary standards remains to be defined by
the Commission.
New limits on information requests to business partners.
The request must be
limited to what is necessary and, for partners withfewer than 5,000
employees, to
information that cannot reasonably be obtained
otherwise.
Reporting standards (ESRS)
As part of the streamlining of the required reporting, the
Commission will adopt revised ESRS via delegated act within 6
months.
This revision will ensure:
Removal of less-important data points,
Priority given to quantitative data,
Clearer distinction between mandatory and voluntary
elements,
Simplification of the structure, and
Better international interoperability.
In
cases where CS3D reporting requirements overlap with CSRD reporting
standards, the information provided for CS3D and CSRD compliance
should be the same.
Transposition deadline
New transposition deadline is 19March
2027.
New transposition deadline is 26 July 2028.
Application postponed to 26 July 2029.
Omnibus changes specific
to the CSRD
Sector-specific standards
The Commission is no longer empowered to adopt binding reporting
standards that are tailored to specific sectors. Instead, it will
provide non-binding sectoral guidance.
Information omitted from the reporting
Companies may now be permitted to omit certain
information (e.g., serious commercial harm, trade secrets,
classified information, security of legal and natural persons,
protection of privacy), with disclosure of the use of the exemption
and reassessment at each reporting date.
Assurance
The deadline for adopting limited assurance standards is
deferred to 1 July 2027 and the obligation to adopt reasonable
assurance standards is removed.
Voluntary standards
New framework for voluntary standards.
These standards (also known as "sustainability reporting
standards for voluntary use") correspond to the baseline
information that a reporting company can ask another company to
provide.
Protected undertakings do not have to provide information that
exceeds the scope of these voluntary standards.
The Commission will establish these voluntary standards by July
19, 2026, and review them at least every four years.
Omnibus changes specific
to the CS3D
Due diligence
The identification and assessment of impacts is restructured in
two stages:
A scoping exercise based solely on reasonably
available information, to identify general areas across their own
operations, those of their subsidiaries and, where related to their
chains of activities, those of their business partners where
adverse impacts are most likely to occur.
A targeted in-depth assessment focused on the
areas where adverse impacts were identified to be most likely to
occur and most severe.
Transition plans for climate
change
Companies are no longer required to report a climate transition
plan, as the prior provisions relating to the transition
plan for climate change are
repealed.
Pecuniary
penalties
The requirement for Member States to base pecuniary penalties on
the net worldwide turnover is removed. Instead, a harmonized cap of
3% of net worldwide turnover is introduced, with Commission
guidelines on the setting of penalties.
Civil
liability
The harmonized civil liability regime is removed.
Liability is determined based on national law.
Full
harmonization
To avoid "gold-plating" by the Member States (enacting
additional/more stringent requirements), full harmonization is
extended to a broader set of core provisions:
Identification duty,
Duty to prioritise adverse impacts,
Duties to address adverse impacts that have been or should have
been identified,
Duty to provide for a complaints and notification
mechanism,
Duty to monitor due diligence measures, and
Duty to report on the matters covered by the CS3D.
These changes reflect the global upheaval of the last year,
which has led to a shift in focus to maintaining competitiveness
with other jurisdictions that are also rolling back regulatory
requirements, such as the United States. California and some other
U.S. states are moving forward with climate-related reporting
requirements, but the pullback on sustainability concerns at the
federal level has been significant. Crowell & Moring lawyers
continue to monitor and report on these developments as they arise.
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