Introduction
On 16 December 2025, the European Parliament formerly endorsed an agreement on key elements of the European Commission’s “Omnibus” simplification package which was released in February 2025. This package aligns adjustments to both the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), aiming to streamline sustainability reporting and due‑diligence requirements across the EU.
The Council has indicated it will confirm the text following the Parliament’s approval. Once the legal and linguistic review is completed, the final act is expected to be published in the Official Journal of the European Union around March 2026, after which Member States will have 12 months to transpose the changes into national law.
The agreement introduces substantial revisions to the scope of companies required to report under the CSRD, clarifies thresholds for CSDDD applicability, and provides direction on the development of simplified European Sustainability Reporting Standards (ESRS), assurance standards, sector guidance, and value‑chain reporting limitations. These updates aim to reduce administrative burden while maintaining the EU’s focus on improving the quality and consistency of sustainability‑related information.
Revisions to the EU Taxonomy Regulation were also adopted the day after and have been published in the Official Journal on 8 January 2026, making simplifications such as streamlined templates and materiality exemptions, effectively available for CSRD reporters.
Corporate Sustainability Reporting Directive (CSRD)
The agreement establishes that CSRD obligations, including the application of ESRS, will apply only to companies and groups in the EU that meet both of the following criteria:
- more than 1,000 employees; and
- net turnover above €450 million.
EU Entities falling under this threshold would also fall outside the Taxonomy reporting requirements and non-EU entities will be required to report based on different criteria.
Future adjustments to thresholds
The agreement gives the European Commission the authority to adjust the turnover thresholds through delegated acts in future, specifically to reflect inflationary developments. It also obliges the Commission to submit a report to the Parliament and the Council by April 2031, and every three years thereafter, evaluating whether the scope of CSRD should be broadened again.
Timing
The revised scope would apply for financial years starting on or after 1 January 2027.
Optional exemption
EU Member States may decide to exempt companies that:
- have fewer than 1,000 employees; and
- record less than €450 million in net turnover (on a consolidated basis where required),
from reporting obligations for financial years beginning between 1 January 2025 and 31 December 2026. Implementation of this option depends on individual Member State decisions.
Exclusion for certain financial holding companies
A new opt‑out is introduced for parent companies qualifying as “financial holding undertakings”, giving them the option to omit consolidated sustainability reporting. However, the agreement specifies that this exemption should remain narrowly defined. A financial holding undertaking is described as an entity whose exclusive purpose is to invest in other businesses and manage those holdings, without participating directly or indirectly in their management. This exclusion applies only when the holding company’s portfolio consists of diversified and operationally independent entities. Each Member State is responsible for incorporating this exemption into its national legislation. It will be essential to review the final transposed text in order to determine its specific implications for undertakings and groups in Luxembourg.
Voluntary reporting framework
Companies outside the CSRD scope may choose to adopt the Commission’s upcoming Voluntary Sustainability Reporting Standard for micro, Small, and Medium‑sized Enterprises (VSME). A delegated act containing the VSME is expected to be published by the Commission.
Corporate Sustainability Due Diligence Directive (CSDDD)
Under the agreement:
- EU companies with more than 5,000 employees and turnover above €1.5 billion fall within the CSDDD; and
- Non‑EU companies generating more than €1.5 billion in EU turnover would also be included.
Notably, companies in scope would no longer be required to publish a climate transition plan aligned with the Paris Agreement.
Next steps
With the European Parliament’s approval in mid‑December 2025 and the Council’s confirmation expected shortly after, the Omnibus package will undergo final legal and linguistic checks before adoption. It enters into force 20 days after its publication in the Official Journal of the European Union, anticipated around March 2026.
Once published, Member States will have 12 months to transpose the changes into national law.
Regarding ESRS, the Commission is currently reviewing European Financial Reporting Advisory Group (EFRAG)’s technical recommendations. A four‑week public consultation on the delegated act for the simplified ESRS is expected in February 2026. Under the agreement, the Commission must adopt this delegated act no later than six months after the Omnibus enters into force.
