Sustainability reporting: EU Council approves simplification of CSRD and CS3D

The Council of the European Union has given the final green light to the “Omnibus I” simplification package , intervening in a targeted manner on the two main European regulations on corporate sustainability: the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D).

The stated objective is to strengthen the Union's competitiveness in a volatile geopolitical context by reducing regulatory complexity, administrative burdens, and indirect impacts on small and medium-sized enterprises.

Simplification is thus framed as a strategic lever to support European economic autonomy.

The text of the legislative act will be published in the Official Journal of the EU in the coming days and will enter into force on the twentieth day following that publication.
Member States will have one year from the entry into force of the Directive to transpose its provisions into national law, with the exception of Article 4 on the level of harmonisation, with which they will have to comply by 26 July 2028 at the latest.

Omnibus I, CSRD: higher thresholds and reduced scope

On the sustainability reporting front, the revision of the CSRD significantly narrows the scope of required companies.

New dimensional thresholds

Only companies with the following will fall within the scope of application:

• over 1,000 employees
• net annual turnover exceeding 450 million euros

For third-country companies, the obligation will apply exclusively to parent companies with a turnover exceeding €450 million in the Union and to subsidiaries or branches with revenues exceeding €200 million generated in the EU.

This represents a significant increase compared to the original regulation, which broadens the exclusion of medium-large companies and reduces the number of entities required to report according to the European ESRS standards.

Exemptions and transitional regime

The text also introduces:

• a transitional exemption for companies already obliged starting from the 2024 financial year (the so-called “wave one”), which will exit the scope of application for the 2025 and 2026 financial years if they no longer fall within the new thresholds;
• an exemption from consolidated reporting for certain EU and non-EU financial holding companies.

The revision therefore reduces the “cascade” effect on smaller operators along the value chain , one of the most critical aspects highlighted by the business world.

Omnibus I, CS3D: due diligence limited to large groups

An even more incisive intervention concerns the directive on sustainability due diligence.

Narrow scope of application

The new threshold requires this only for companies with:

• over 5,000 employees
• net turnover exceeding 1.5 billion euros

The rationale is to focus only on large groups with the greatest ability to influence global value chains and with adequate resources to support the costs of due diligence processes.

More flexible approach to the value chain

Companies will be able to focus on the areas of their business chain where negative impacts – current or potential – are most likely.

If impacts of equal severity or probability exist in multiple areas, priority may be given to those involving direct business partners. Furthermore, companies will be required to rely on "reasonably available" information, reducing information requests from smaller suppliers.

The explicit aim is to mitigate the effect of shifting obligations onto smaller partners.

The requirement for a climate transition plan has been eliminated.

One of the most significant changes concerns the removal of the obligation, foreseen in the original version of the CS3D, to adopt a transition plan for climate change mitigation, a tool for strategically aligning companies with the Union's climate objectives.

The removal of this provision significantly lightens the strategic and operational burden on the companies concerned, however the risk is that of weakening the structural integration of climate factors into business models , precisely at a stage in which finance and markets require clarity on decarbonisation paths.

Liability and sanctions: end of the EU harmonized regime

The new text eliminates:

• the harmonized European civil liability regime;
• the obligation for Member States to provide for the mandatory application of national liability rules even in the event of conflicts of law.

Liability for non-performance will be regulated at national level .
Administrative fines are capped at 3% of the company's global net turnover , with implementing guidelines entrusted to the European Commission.

Timeline: CS3D postponed to 2029

The amendment package includes a deferral of the deadlines:

• the deadline for the transposition of CS3D by Member States is postponed to 26 July 2028;
• Businesses will have to comply with the new provisions by July 2029. (Source: https://www.osservatoriobilancisostenibilita.it/ )