Following last week’s Omnibus agreement in the European Parliament, the EU’s flagship sustainability directives, CSRD and CSDDD, will now apply to fewer companies than initially planned. After months of tension and a political balancing act, the European People’s Party (EPP) reached a compromise with left-wing lawmakers on the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).
Framed within the broader EU Omnibus strategy to reduce corporate reporting burdens, the deal marks a significant shift in the Union’s regulatory approach to sustainability governance. Although the Directives remain intact, their reach has been substantially scaled back, prompting sharp criticism from sustainability advocates and cautious approval from industry observers. Continue reading for more on the updates and what they mean for the wider corporate sustainability landscape.
Fewer companies, fewer requirements
At the heart of the omnibus compromise is a significant narrowing of scope. CSRD, originally intended to apply to approximately 11,000 companies, will now affect just 4,700 businesses. Under the new threshold, only organisations with more than 1,000 employees and at least €450 million in annual revenue will be subject to the enhanced reporting requirements.
These changes reflect the EU’s commitment to a broader deregulatory agenda, announced earlier this year, to reduce administrative obligations by 25 percent for large firms and 35 percent for SMEs. The addition of a revenue threshold was a key concession in last week’s negotiations. Another material dilution relates to climate transition plans. Where companies were previously required to develop, act upon, and report on these plans, they will now only be obliged to develop and publish them.
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CSDDD also pulled back
Similar reductions apply to the Corporate Sustainability Due Diligence Directive. Under the omnibus deal, only companies with at least 5,000 employees and €1.5 billion in turnover will be required to conduct environmental and human rights due diligence across their value chains.
Critically, forward-looking risk assessments and efforts to establish a common civil liability framework have also been stripped out. What remains is a significantly weakened version of what was once billed as a cornerstone of the EU’s sustainable business agenda.
A divided response
Unsurprisingly, the response has been polarised. Former MEP Richard Howitt, key architect of the EU’s original non-financial reporting directive, called the decision “regressive”, warning that it sets sustainability efforts back by more than a decade.
Green MEP Kira Marie Peter-Hansen echoed this sentiment, labelling the compromise “not simplification, but surrender”. However, legal experts offered a more measured view. ESG lawyer Lucy Blake noted that the compliance risks tied to ESG inaction remain high, especially as national-level laws and civil society scrutiny continue to evolve. “For many companies, the material business risks of ESG neglect haven’t changed,” she said.
What comes next?
The agreed Omnibus position will go to Parliament’s Legal Affairs Committee this week, followed by a plenary vote later in the month. While further amendments are possible, the direction of travel is now clear: a lighter, more targeted EU sustainability regime, at least for the time being.
Regulation may weaken, but business responsibility endures
While the Omnibus package may relieve pressure for some businesses in the short term, the commercial, reputational, and legal risks tied to ESG inaction remain profound. At ISS, we believe companies that move early (building in-house ESG capacity and preparing robust sustainability strategies) will be better placed to manage uncertainty and gain a competitive edge. Explore our accredited sustainability courses online, designed to help you navigate reporting, due diligence, and ESG leadership with confidence and ease.
Dedicated to harnessing the power of storytelling to raise awareness, demystify, and drive behavioural change, Bronagh works as the Communications & Content Manager at the Institute of Sustainability Studies. Alongside her work with ISS, Bronagh contributes articles to several news media publications on sustainability and mental health.
