First omnibus package to relax CSDDD, CSRD and EU taxonomy obligations

Negotiators from the EU Parliament and the Council have now reached an agreement on the outstanding points of the first omnibus package. The content of the agreement goes far beyond the EU Commission’s proposals. The latter had published the draft of the first announced omnibus package on February 26, 2025.

With the first omnibus initiative, the EU is planning, among other things, a postponement (so-called stop-the-clock directive), a reduction in the scope of the directives and a weakening of the due diligence obligations. The postponement of the reporting obligation under the CSRD for companies that would normally have had to report from the 2025 or 2026 financial year by two years and a postponement of the due diligence obligations under the CSDDD by one year had already been approved by the Council and the EU Parliament in Directive (EU) 2025/794 of April 14, 2025.

Planned changes to the CSRD

The EU Commission would like to bring the application thresholds of the CSRD and CSDDD closer together. According to the Commission’s proposals, in future only companies with more than 1,000 employees and either more than 50 million euros in turnover or more than 25 million euros in total assets will have to submit a sustainability report in accordance with the CSRD. This is intended to significantly reduce the number of companies obliged to comply with the CSRD. Previously, two of the three criteria had to be exceeded: more than 50 million euros in turnover, more than 25 million euros in total assets or more than 250 employees. The Commission has also proposed adapting the ESRS and the obligations under the EU Taxonomy Regulation and postponing the reporting obligations for companies in the second wave by two years. Listed SMEs are to be completely excluded from the scope of the CSRD. SMEs are also to be relieved by the fact that the companies obliged by the CSRD are no longer allowed to collect all information from SMEs for the purposes of their own sustainability reporting.

Provisional agreement: On December 9, 2025, the EU Parliament and the Council reached a provisional agreement to the effect that only companies with more than 1,000 employees and an annual turnover of more than 450 million euros should be subject to reporting requirements.

The European Supply Chain Directive CSDDD is to be weakened

The negotiators of the EU Parliament and the Council have also agreed on a significant weakening of the European Supply Chain Directive CSDDD. The EU now wants to further simplify the European Supply Chain Directive CSDDD, which had already been weakened before its adoption on June 13, 2024 at the insistence of individual member states.

Provisional agreement: The EU Parliament and Council want to significantly reduce the scope of application of the CSDDD once again compared to the Commission’s proposals and only impose the due diligence obligations on large companies with more than 5,000 employees and an annual net turnover of more than 1.5 billion euros. It is also important that the member states are now to be expressly permitted to adapt the scope of application of their existing national regulations, i.e. in Germany the Supply Chain Due Diligence Act, to the scope of application of the CSDDD. It remains to be seen whether the German legislator will take this step as part of the currently planned simplification of the LkSG. Among others, the Economic Committee of the Federal Council called for this on October 6, 2025, although the exact scope of the CSDDD was not yet foreseeable at that time.

Identification and assessment of negative impacts in relation to business partners

The CSDDD stipulates that companies must assess and identify actual and potential negative impacts in relation to the entire chain of activities. This includes their own business activities, those of their subsidiaries and all direct and indirect business partners. The EU Commission would now like to limit these due diligence obligations to its own activities, those of subsidiaries and those of direct business partners, i.e. exclude indirect business partners in principle, except where there are indications of risks or violations. The due diligence obligations would then be similar to those of the German Supply Chain Due Diligence Act (LkSG).

According to the proposal, information for the general mapping of risk areas can no longer be requested by direct business partners with fewer than 500 employees if it goes beyond the information required by the VSME standard under the CSRD.

Provisional agreement: The EU Parliament and the Council want to make risk analysis even more risk-oriented. The request for information from business partners for the purposes of risk assessment is also to be significantly more restricted. For risk scoping, no more information is to be requested from business partners at all and for in-depth risk assessment, information is only to be requested as a last resort for companies with fewer than 5,000 employees. However, the fundamental exemption of indirect business partners – as proposed by the Commission – was not approved by the Council and Parliament in the provisional agreement. However, where the risk situation is comparable, companies should be able to prioritize direct business partners.

The obligation to terminate the contract should no longer apply

The current CSDDD obliges companies to terminate the contractual relationship under certain conditions if a milder remedy – such as a suspension of the contractual relationship and corrective action plans – does not promise success in the event of serious potential or actual negative effects. The obligation to terminate business relationships should be removed in order to avoid interrupting production-critical supply chains and to give suppliers the opportunity to improve the situation. Instead, the focus should be on a temporary suspension of the contractual relationship.

Fewer stakeholders need to be involved

To date, the involvement of stakeholders has been required in numerous steps of due diligence. In addition to those directly affected, stakeholders include consumers and human rights and environmental organizations. The circle of stakeholders to be included is to be reduced to those directly affected and their representatives. The sub-areas of the due diligence obligations in which stakeholders are to be involved are also to be reduced.

Monitoring effort to be reduced

According to the current CSDDD, the appropriateness and effectiveness of measures to identify, prevent, mitigate, remedy and minimize the extent of negative impacts must be reviewed at least every twelve months. The EU Commission would like to reduce the workload by only requiring companies to take monitoring measures every five years and when there is a specific reason to do so.

Climate plans should no longer have to be implemented

In addition to the due diligence obligations, the current CSDDD also obliges companies to draw up a climate plan with measures that must also be implemented. The Commission already wanted to weaken this obligation.

Provisional agreement: Parliament and Council negotiators have agreed that the regulations on climate plans should be removed from the CSDDD and only be included in the CSRD.

Sanctions and liability: Member states to be given more freedom of decision

Instead of a minimum upper limit for sanctions of 5% of global net sales, the Commission now only wants to set guidelines. In their provisional agreement, Parliament and the Council have agreed on a minimum upper limit of just 3% of global net turnover. The EU Commission also wants to give member states a free hand with regard to civil liability. Currently, the member states are supposed to ensure that companies can also be held liable under civil law in the event of culpable breaches. This obligation is now to be dropped.

Commission strives for greater harmonization

The EU Commission would also like to reduce the member states’ scope for action. The aim is for the transposition laws of the individual EU member states to diverge less. Accordingly, the areas in which the member states cannot adopt divergent regulations are to be extended to

– the requirements for due diligence at Group level,
– all requirements for identifying negative impacts, except those relating to the termination of contractual relationships, preventive measures and the elimination of actual negative impacts and
– the requirements for the complaints procedure.

The start of the CSDDD is postponed for another year

Companies should have more time for implementation. Instead of July 26, 2027, the first companies will not have to apply the CSDDD until July 26, 2028. Following their provisional agreement, the Parliament and Council would like to postpone this date of application by another year to July 26, 2029. To enable companies to plan better, the countries are to transpose the directive into national laws more quickly. In addition, the Commission’s specific guidelines on fulfilling due diligence obligations are also to be presented six months earlier than previously planned, namely on July 26, 2026, although the timetable for the guidelines may have to be adjusted again as things stand.

Final vote on the omnibus package still pending

The first postponement of the CSRD and the CSDDD has already been implemented. The final vote must now be held in the Council and Parliament on the substantive amendments.

What the planned changes mean for companies

The changes would relieve the economy to a greater or lesser extent. Many companies would be exempt from the obligations of the CSRD and some affected companies would only have to report for the first time later than before.

If the EU Parliament gets its way, significantly fewer companies would also have to comply with due diligence obligations under the CSDDD. And numerous detailed obligations would no longer apply. The effort required for investigations and assessments of negative impacts would be reduced and simplified.

Outlook

A final agreement is expected to be reached in week 51.