The EU has now formally published the Omnibus Directive amending the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) in the EU Official Journal. The Directive enters into force 20 days after publication, closing a year of political negotiation that began with the European Commission’s 2025 simplification proposal.

The final agreement goes materially further than the Commission’s initial draft. While the Commission aimed to reduce administrative burden and improve competitiveness, the co-legislators ultimately narrowed the scope of both laws far more aggressively than originally proposed.

CSRD: From Broad Coverage to Concentrated Scope

Under the original CSRD, companies with more than 250 employees were generally in scope. The Commission proposed raising that threshold to 1,000 employees, which alone would have removed roughly 80% of companies from coverage.

The final Omnibus agreement retains the 1,000-employee threshold and adds a new financial filter of €450 million in annual revenue. The combined effect excludes an estimated 90% of companies that were previously expected to report.

This represents a fundamental shift. CSRD now applies primarily to the largest enterprises operating in the EU or with significant EU activity. However, for those still in scope, the core reporting framework remains intact, including the principle of double materiality — meaning companies must assess both how sustainability issues impact financial performance and how their activities impact society and the environment.

Simplified European Sustainability Reporting Standards (ESRS) are still expected, meaning technical reporting requirements may evolve further.

CSDDD: Higher Thresholds, Softer Enforcement

Changes to CSDDD are even more pronounced. The final agreement raises the applicability threshold to 5,000 employees and €1.5 billion in revenue. This removes the vast majority of companies from mandatory human rights and environmental due diligence obligations.

Beyond scope reduction, several substantive adjustments were made:

• The requirement to adopt formal climate transition plans has been removed.

• The EU-wide civil liability regime has been eliminated.

• Penalties are capped at 3% of global revenue.

• Implementation is delayed by one year, with compliance beginning in July 2029.

In short, the due diligence regime remains, but it is more targeted and less punitive than originally envisioned.

Supply Chain Impact: Reduced Trickle-Down Burden

A key political concern throughout negotiations was the cascading impact of sustainability requirements on small and mid-sized enterprises (SMEs).

The final agreement limits the information that in-scope companies may request from smaller value-chain partners. Companies with fewer than 1,000 employees may decline to provide information beyond what is required under the Voluntary Sustainability Reporting Standard for SMEs (VSME). Under CSDDD, companies are directed to rely primarily on reasonably available information instead of systematically requesting detailed disclosures from smaller suppliers. This signals a clear attempt to prevent indirect compliance pressure from flowing downstream.

Competitiveness as the Central Theme

EU Council communications surrounding the agreement consistently emphasize competitiveness, flexibility, and proportionality. The language of “simplification” and “cutting red tape” now defines the political framing of EU sustainability regulation.

At the same time, the EU has not reversed course on sustainability as a policy priority. Instead, it has concentrated obligations among the largest companies while reducing the burden on mid-market actors. For executives, this is a recalibration, not a retreat.

What Happens Next?

Although the Directive is now published, implementation work is only beginning. Member States must transpose the amendments into national law, which may introduce variations in application. Simplified ESRS standards still need to be finalized. Additional guidance on assurance, governance expectations, and due diligence processes is expected.

For companies that remain above the new thresholds — including many large EU and non-EU multinationals — preparation efforts should now accelerate. Systems, controls, data governance, and value-chain mapping cannot be deferred indefinitely.

Executive Takeaway

Omnibus I significantly narrows the reach of CSRD and CSDDD and softens certain enforcement elements. Approximately 90% of companies originally expected to fall under CSRD are now excluded, and CSDDD applies only to the largest enterprises.

Yet for companies that remain in scope, the obligations are still real, structured, and strategically material. Sustainability reporting and due diligence are no longer expanding outward — they are concentrating upward. The political debate over scope has largely concluded. The next chapter is operational execution.