EU Omnibus Package Published: CSRD and CS3D to Be Delayed and Scaled Back
The European Union today published its long-awaited "Omnibus" package, proposing to delay key European ESG rules, while simultaneously reducing the applicability and burden of corporate sustainability reporting and due diligence requirements for European and global companies operating in the European Union.
On February 26, 2025, the European Commission unveiled its long-awaited "Omnibus" package, proposing significant changes to EU ESG laws. The changes aim to reduce the compliance burden on companies, while enhancing global competitiveness. The suggested reforms primarily impact the Corporate Sustainability Reporting Directive ("CSRD") and Corporate Sustainability Due Diligence Directive ("CS3D"), while also refining the EU Taxonomy framework.
CSRD, Taxonomy Regulation, and ESRS: Proposed Delay and Reduced Scope
The Commission proposes effectively delaying the application of the CSRD for companies that have not yet commenced reporting. This delay provides these companies with an additional two years to prepare for compliance with CSRD and, thereby, with the Taxonomy Regulation. Additionally, Omnibus proposes raising the applicability threshold, limiting CSRD's scope to companies and groups with EU parents that have more than 1,000 employees (previously, the threshold was 250 employees) and that have either net turnover exceeding €50 million, or a balance sheet in excess of €25 million. If adopted as proposed, the European Union claims this change would exempt approximately 80% of currently in-scope companies.
In parallel, the European Sustainability Reporting Standards ("ESRS"), which contain the detailed requirements for CSRD disclosures, will be simplified, substantially reducing the number of data points. EFRAG (the body responsible for drafting the ESRS) has committed to participating in a simplification process alongside the European institutions; therefore, we expect draft revised ESRS to be published in due course.
CS3D: Focus on Direct Suppliers and Delayed Rollout
CS3D is also being delayed and scaled back. The implementation deadline will be pushed back by one year, shifting the start date for compliance to mid-2028. Crucially, companies will now, in principle, be required to conduct due diligence only on direct suppliers, rather than their entire supply chain, significantly limiting the scope of due diligence that companies will need to undertake. Companies now need to review the effectiveness of their due diligence arrangements only every five years rather than annually, as in the current CS3D text. Both of these changes will reduce the upfront and ongoing regulatory pressure on in-scope businesses, as well as their business partners.
The Omnibus package will now need to go through the comprehensive legislative process within the European Union, with the ultimately agreed text subject to votes. It is possible that further changes to Omnibus could be introduced during this process.
Further changes proposed by Omnibus, including to the EU Carbon Border Adjustment Mechanism, will be covered in more detail in our upcoming Commentary.
