Introduction

On December 16, the European Parliament approved the Omnibus agreement concluding trilogue negotiations on the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive. The vote formally finalizes a package of targeted simplifications that narrow the scope of sustainability reporting and due diligence obligations while keeping the EU’s overall regulatory framework intact. The changes respond to sustained concerns from companies, auditors, and member states about proportionality, cost, and feasibility, particularly for mid sized firms and complex value chains.

While the legislation has been simplified, the EU has not reversed its direction on sustainability governance. Transparency, risk management, and accountability remain core expectations for large companies operating in or with the European Union.

Why the EU Recalibrated CSRD and CSDDD

CSRD and CSDDD were designed to expand corporate accountability across environmental, social, and human rights issues. Following adoption, implementation planning revealed significant challenges. Companies flagged reporting volume, data availability across value chains, and overlapping regulatory requirements. Member states raised concerns about competitiveness and administrative burden at a time of economic pressure and geopolitical uncertainty.

The December 16 agreement reflects a political decision to recalibrate rather than retreat. The EU chose to reduce the number of companies directly in scope and streamline obligations while preserving the legal structure of both directives. Public EU communications confirm that a substantial share of companies originally expected to fall under CSRD will no longer be required to report, but no official percentage has been published by the European Commission or Parliament at the time of writing. Claims about the precise share of companies or reporting datapoints removed are therefore not cited here.

What Changed for CSRD After the Vote

The December 16 vote substantially narrowed the scope of CSRD by limiting mandatory reporting to the largest companies. By applying a combined threshold of 1,000 or more employees and at least 450 million euros in net turnover, the final agreement removes an estimated 90 percent of companies that would otherwise have been subject to sustainability reporting requirements. Timelines have also been extended, particularly for Wave 2 and non EU companies. While scope and timing have shifted, the underlying reporting framework remains unchanged. The table below summarizes how applicability and timelines have been reset.

CSRD Scope, Timing, and Reporting Overview

Element	After December 16 Vote	Before Simplification
Scope threshold	1,000+ employees and €450M+ net turnover	250+ employees and either €50M+ net turnover or €25M+ total assets
EU listed companies	In scope only if revised thresholds are met	Broad inclusion of listed companies
Non EU company inclusion	EU subsidiary or branch with €200M+ EU turnover and €450M+ consolidated EU turnover	Non EU inclusion expected but not clearly defined
First reporting year for Wave 2	FY2027, reported in 2028	FY2025, reported in 2026
First reporting year for non EU companies	FY2028, reported in 2029	Earlier application anticipated
Reporting standards	ESRS under simplified approach	Full ESRS as originally adopted
Assurance	Limited assurance	Limited assurance with pathway toward reasonable assurance

CSRD Reporting Content

Double materiality: Companies must continue to conduct a double materiality assessment covering both financial materiality and impact materiality. This assessment remains the basis for determining which sustainability topics are disclosed under CSRD.

Reporting standards: Companies in scope are required to report in line with the European Sustainability Reporting Standards. The ESRS are being revised under a simplified approach, but their use remains mandatory.

Value chain information: Requests to suppliers with fewer than 1,000 employees are capped at the VSME standard. Companies may request additional information only where they clearly explain why it is necessary. Smaller suppliers may refuse requests that exceed this scope.

Use of estimates: Companies may rely more explicitly on estimates and secondary data where primary value chain data is not reasonably available.

Assurance: CSRD reports remain subject to limited assurance, with no immediate move to reasonable assurance.

What Changed for CSDDD

The final agreement significantly raises the entry threshold for CSDDD and delays its application. Due diligence obligations now apply only to very large EU and non EU companies, sharply reducing the number of firms in scope. At the same time, lawmakers narrowed the substance of due diligence by confirming a risk based approach and removing transition plan and civil liability provisions. The table below outlines how scope, timing, and enforcement have been recalibrated.

CSDDD Scope, Timing, and Due Diligence Overview

Element	After December 16 Vote	Before Simplification
Scope threshold (EU companies)	5,000+ employees and €1.5B+ global turnover	1,000+ employees and €450M+ global turnover
Scope threshold (non EU companies)	€1.5B+ net turnover generated in the EU	€450M+ net turnover generated in the EU
Entry into force	July 2029	July 2027
Due diligence approach	Risk based prioritisation by severity and likelihood	Less explicit prioritisation framework
Transition plan	Removed from CSDDD	Included in earlier drafts
Civil liability	Removed	Included
Sanctions	Up to 3 percent of global turnover	Defined at national level, up to 5 percent

CSDDD Reporting Content

Risk based prioritisation: Companies are expected to identify, assess, and address adverse human rights and environmental impacts using a risk based methodology. Prioritisation is driven by severity and likelihood across the value chain, rather than supplier tier.

Value chain engagement: Engagement with business partners remains required, but expectations are explicitly proportional to the company’s leverage and the capacity of suppliers. Due diligence is no longer framed as a comprehensive mapping exercise across all tiers.

SME information requests: Large companies may request information from smaller suppliers only when it is genuinely necessary for due diligence purposes. This limits administrative burden while preserving the ability to address high risk impacts.

Remediation and mitigation: Companies must still take appropriate measures to prevent, mitigate, or bring adverse impacts to an end where they are identified, using tools proportionate to risk and influence.

Enforcement and consequences: Supervisory authorities retain the power to impose administrative sanctions. Contract suspension is permitted in cases of severe adverse impacts but is not mandatory, allowing companies to maintain relationships under defined conditions.

Conclusion

The December 16 vote marks a decisive reset in EU sustainability regulation. CSRD and CSDDD remain central pillars of the EU’s governance framework, but their application is now more focused, proportionate, and risk driven. Fewer companies will be directly subject to mandatory obligations, and reporting expectations are more clearly aligned with practical implementation realities.

For companies that remain in scope, the message is clear. Strong sustainability data, governance, and value chain risk management are still expected. Simplification changes the compliance path, but it does not change the destination.

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