The EU is rethinking its approach to sustainability and corporate accountability. As we explored in our recent article on the EU simplification agenda, the current political mandate is driven by a clear objective: to simplify rules, ease administrative burdens, and strengthen Europe’s competitiveness.
In February 2025, the European Commission introduced its first “Omnibus I” package, the initial step in a broader simplification agenda. The package aims to streamline key sustainability rules, namely the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the EU Taxonomy and the Carbon Border Adjustment Mechanism (CBAM), to ease compliance for companies while supporting competitiveness.
Since then, the file has progressed through the co-legislators, namely the Council of the European Union, representing EU Member States, and the European Parliament, provoking intense debate over where simplification ends and deregulation begins.
In this article, we will focus on policy developments related to the CSRD and CSDDD, tracing the evolution of the negotiations, reflecting on what we should expect from the final law, and highlighting what companies should keep in mind to prepare for compliance.
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The Omnibus I Proposal
On the 26th February, the Commission adopted its Omnibus I legislative package, aiming to deliver “over €6 billion in administrative relief” by streamlining existing rules and allowing companies, especially SMEs, to redirect resources toward their core activities.
For both the CSRD and the CSDDD, the Commission’s proposal significantly raised thresholds for companies to fall within the scope of sustainability reporting and due diligence obligations, while narrowing the focus of value-chain responsibilities to direct business partners and delaying certain implementation timelines. In practice, the Commission aimed to reduce the number of companies directly impacted and eased compliance burdens, particularly for smaller and mid-sized entities.
The Council’s Mandate
The Council took this approach a step further. On the 23rd June 2025, it adopted its negotiating mandate, endorsing even deeper simplifications to both directives.
In the case of sustainability reporting, the Council maintained the employee threshold of 1,000 but introduced an additional turnover threshold of €450 million, further restricting the number of companies in scope. For the due diligence directive, the Council raised the bar considerably higher, applying it only to companies with at least 5,000 employees and a turnover above €1.5 billion. It also redefined how due diligence should be applied, shifting from an entity-based model that required mapping entire value chains to a risk-based approach, focused only on areas where adverse impacts are deemed plausible.
The Parliament’s Position
After complex negotiations, including an initial draft position by rapporteur Jörgen Warborn (EPP), developed with input from centrist groups but ultimately rejected, lawmakers adopted the Parliament’s position in a vote on 13 November.
Warborn’s revised proposal eventually secured majority support thanks to votes from far-right groups. This marks the first time that legislative deliberations will move forward on the basis of a mandate backed by the far right, raising questions about the future of the “pro-European platform” supporting Commission President von der Leyen, composed of the EPP, the Socialists and Democrats (S&D), the liberal Renew Europe group, and the Greens.
The adopted text removes all references to climate transition plans aligned with the Paris Agreement from the CSDDD, and significantly narrows the scope of companies subject to due diligence. Only firms with more than 5,000 employees and a turnover above €1.5 billion would remain in scope, matching the Council’s mandate. These companies would apply a risk-based assessment focused on business partners with more than 5,000 employees.
What to Expect From the Final Law
At this stage of the negotiations, the contours of the “final landing zone” are starting to take shape. Although inter-institutional talks (“trilogue”) could still bring unexpected twists, EU institutions are largely aligned on a number of core points.
Where institutions converge
- Easing CSRD burdens on small suppliers: Both Parliament and Council aim to limit information requests for out of scope companies to what is in the Voluntary SME Standard, a tool which would make it easier for SMEs to provide sustainability information to large companies. The cap does not prohibit the sharing of information on a voluntary basis, such as information that is commonly shared among undertakings in a given sector.
- CSRD sector-specific standards: Both sides support removing sector-specific European Sustainability Reporting Standards (ESRS) and instead introducing sectoral implementation guidance.
- Limiting CSDDD’s scope: Both institutions back limiting the directive to companies with more than 5,000 employees and €1.5 billion in turnover, significantly narrowing the scope to the largest firms.
- Establishing CSDDD civil liability: There is broad consensus against establishing an EU-wide civil liability regime, leaving Member States to retain their own frameworks.
- Reduced CSDDD stakeholder engagement: Both institutions favour a reduced level of stakeholder engagement compared to the original Commission proposal.
Where differences remain
- CSRD’s scope: Parliament and Council remain divided on the employee threshold for companies falling under the CSRD. Parliament supports a higher threshold, covering companies with up to 1,750 employees against the 1,000 employee threshold proposed by the Council, while both institutions agree on maintaining the €450 million turnover criterion.
- Due diligence approach: The Council proposes limiting in-depth due diligence to a company’s own operations, its subsidiaries, and direct business partners, unless there is reasonably available information indicating adverse impacts further along the supply chain. Parliament, by contrast, supports broader coverage across the value chain, up to the 5,000-employee threshold.
- CSDDD value chain obligations: Parliament suggests that information requests to companies with fewer than 5,000 employees should be used only as a last resort and only where the information cannot reasonably be obtained elsewhere. The Council proposes that such targeted information requests apply only to companies with fewer than 1,000 employees.
- Climate transition plans: Under the CSDDD, the Council supports softening the language from ensuring “compatibility with” to merely “contributing to” the Paris Agreement goals. In parallel, Parliament has removed all references to climate transition plans from the CSDDD.
- CSDDD due diligence assessments: According to the Council, companies would need to review their due diligence systems every five years, rather than annually as foreseen in the original CSDDD. Parliament proposes a review every four years.
Next Steps For The “Omnibus I” Simplification Package
The inter-institutional negotiations between the European Parliament and the Council will now determine the final shape of the Omnibus I package. These trilogues are expected to conclude by the end of 2025, as both policymakers and industry stakeholders call for swift adoption to deliver the promised simplification and regulatory clarity.
While many of the core elements, such as scope thresholds and civil liability, are largely settled, details on due diligence coverage, climate transition plans, and value-chain obligations remain open for discussion. Businesses should therefore expect further technical adjustments before the law is finalised.
Preparing for What Comes Next
This period of uncertainty can feel challenging, but it’s also a good moment for companies to take stock and strengthen their sustainability governance and compliance systems. Even as rules evolve, expectations from investors, regulators and consumers aren’t going away; they still want clarity and accountability.
Now is the time to:
- Review internal reporting and due diligence processes to ensure they remain aligned with international standards.
- Map key risks within the value chain and prioritise areas where adverse impacts are most likely.
- Build flexibility into compliance frameworks to adapt to differing national transpositions or potential timeline shifts.
- Continue communicating progress transparently, maintaining trust with stakeholders even as regulatory obligations evolve.
- For non-EU suppliers: strengthen sustainability data collection, transparency, and due diligence practices to align with EU expectations under the CSRD and CSDDD, ensuring continued access to and competitiveness within the EU market.
Early movers will not only be better prepared for the eventual requirements but will also gain a competitive advantage through stronger resilience, credibility, and investor confidence.
Key Takeaways
The Omnibus I reform is an important moment in the EU’s attempt to balance competitiveness with sustainability. But it doesn’t mean the conversation is over. Even if higher thresholds will take some companies out of the formal scope, it’s not a signal to slow down. National rules, voluntary standards and everyday market expectations will still shape how due diligence and sustainability reporting are assessed.
For most businesses, the real takeaway is simple: staying proactive still pays off. Keeping strong governance in place and being clear about your sustainability story will make whatever comes next far easier to handle.
If you’d like to understand what these changes mean for your organisation, Ohana’s team is always ready to support in these uncertain times. Get in touch with our team and discover how we can work together on preparing for what’s next.