Where has the EU's Omnibus got to now?
03 June 2025
What you need to know
- To improve EU competitiveness the EU Omnibus Package proposed substantive changes (the Content Directive) to the Corporate Sustainability Due Diligence Directive 2024/1760 (CS3D), the Corporate Sustainability Reporting Directive 2022/2464 (CSRD) and the EU Taxonomy Regulation 2020/852 (Taxonomy Regulation).
- The Content Directive is currently being negotiated EU Parliament and EU Council. MEPs have proposed over 500 amendments and the EU Council has published a guidance document to pave the way for a compromise agreement on the proposals. Negotiations between the EU Parliament and the Council are anticipated between October and December 2025.
- In related developments, information has been leaked that EU Commission is considering delaying additional requirements in the EU Sustainability Reporting Standards that will be phased-in for Wave 1 companies in FYs 2025 and 2026, and the European Ombudswoman announced that she has opened an inquiry into how the EU Commission prepared the Omnibus proposals following complaints by eight NGOs.
- France and Germany have called for the CS3D to be repealed but Denmark, which is due to take over the Presidency of the EU Council in July, favours simplification rather than the abolition of the CS3D.
What you need to do
Companies in-scope of this legislation need to keep up to date with the proposed to understand what their sustainability reporting and due diligence obligations may be going forward.
Overview
The Stop-the-Clock Directive ((EU) 2025/794) is currently being implemented into the national law of Member States. The EU Parliament and EU Council have now commenced negotiations on the second of the Omnibus Package directives, namely the Content Directive, The Content Directive will make substantive changes to the Corporate Sustainability Due Diligence Directive 2024/1760 (CS3D), the Corporate Sustainability Reporting Directive 2022/2464 (CSRD) and the EU Taxonomy Regulation 2020/852 (Taxonomy Regulation) (see EU Parliament adopts Stop-the-clock Omnibus Proposal and process to simplify ESRS starts).
There have also been a number of related developments concerning the reporting obligations of 'Wave 1 companies' – ie. those already reporting under the CSRD complaints about the process by which the EU Commission has put together the Omnibus Proposal, as well as high-profile calls from politicians to abolish the CS3D altogether.
This article provides an update on these developments and attempts to separate the concrete proposals from the noise that surrounds the Omnibus.
Where have the negotiations reached?
Members of the EU Parliament have published their proposals, which amount to over 500 amendments to the Content Directive text set out by the EU Commission (for information on the changes proposed by the EU Commission, see EU Commission publishes first Omnibus Package to simplify sustainability regulations).
The table below summarises some of the key areas of debate and related proposals:
Issue | Current legislation | EU Commission proposal in the Omnibus Package's Content Directive | MEPs' proposals |
Scope of CSRD | Wave 1 companies – Large undertakings and parent undertakings of a large group that are Public Interest Entities (PIEs) with, in effect, more than 500 employees and that exceed one of: €25m total balance sheet; or €50m net turnover (T/O) Wave 2 companies – Large undertakings exceeding two of: 250 employees; €25m total balance sheet; and €50m net T/O Wave 3 companies – Listed SMEs that do not exceed two of: 250+ employees; €25m total balance sheet; and €50m net T/O Certain financial institutions or insurance undertakings that are large undertakings or listed SMEs Wave 4 – non-EU companies with EU T/O of €150m+ in the last two FYs and with either: (i) an EU subsidiary meeting the large undertaking criteria or that is a listed SME; or (ii) an EU branch with €40m+ net T/O | Aligns the CSRD scope / qualification thresholds with that of CS3D and thereby removes 80% of companies from the scope of CSRD Amendments to scoping so that obligations apply to large undertakings and parent undertakings of a large group that exceed 1,000 employees; €25m total balance sheet; and/or €50m net T/O Listed SMEs no longer in-scope Non-EU companies with EU T/O of €450m+ in last two FYs and with either (i) an EU subsidiary meeting the large undertaking criteria or that is a listed SME, or (ii) a EU branch with €50m+ net T/O
| A range of proposals have been put forward as to scope. Some propose that companies with over 500 employees should have to report under the ESRS but that companies with less than 500 employees but which are not also micro-undertakings should be subject to simplified reporting requirements Other proposals amend the scope of CSRD to large undertakings exceeding 3,000 employees, and a net global T/O of €450m or even to large undertakings exceeding 10,000 employees and either exceed €500m T/O or a balance sheet total of €250m Some proposals would also retain current obligations for listed SMEs and mid-large credit and insurance undertakings
|
EU Sustainability Reporting Standards (ESRS) | Commission Delegated Regulation (EU) 2023/2772 contains the first ESRS and came into force from 1 January 2024 (see First European Sustainability Reporting Standards (ESRS) apply from 1 January 2024). | Proposes to revise the ESRS without delay by: removing the least important datapoints; prioritising quantitative datapoints over narrative text; and further distinguishing between mandatory and voluntary datapoints. It also proposes to remove the requirement for the Commission to adopt sector-specific ESRS | Some proposals specify that the ESRS should be redrafted to ensure that they: are simple and proportionate; are quantitative (to the greatest extent possible); avoid overlaps with other EU reporting requirements; avoid imposing disproportionate financial (as well as administrative) burdens on in-scope companies; and ensure interoperability with internationally-recognised standards A limit on the number of mandatory datapoints of 100 and on the voluntary datapoints of 50 is also proposed |
Repeal of CS3D |
| Retains CS3D but proposes: changes to the scope of the due diligence (DD) required (see row below on due diligence scope); removing the 'obligation of last resort' to terminate relationships with business partners; reducing the frequency of assessments of DD measures and monitoring business partners to every 5 years; removing EU-level civil liability and certain “access to justice facilitations”; and postponing the DD requirements by a year and bringing forward adoption of guidelines on DD and Transition Plans by a year | See the section on whether the CS3D will be scrapped below |
CS3D thresholds | The Directive applies to companies or their ultimate parent where they have more than 1,000 employees and €450m net worldwide T/O. Non-EU companies or their ultimate parent with EU T/O over €450m are also in scope
| No proposal to change thresholds | A range of proposals have been put forward. Some propose amending the scope of the Directive to limit it to those companies with more than 3,000 employees and a net global T/O of €450m. A French proposal seeks to align the CS3D thresholds with that in its 'Loi au devoir de vigilance' and apply only to companies with more than 5,000 employees and €1.5b T/O
|
Scope of Due Diligence (DD) | The Directive requires DD of the business partners in an in-scope company's "chain of activities" Downstream activities of business partners that should be subject to DD are limited to distribution, transport and storage and do not apply to customers The Directive takes a risk-based approach with DD focusing on areas of the chain of activities where adverse impacts are most likely to occur and to be most severe | The Commission proposes to restrict DD to Tier 1 (i.e. direct) business partners. DD for business partners with less than 500 employees should not exceed the information required by the voluntary standards (subject to derogations). DD will only be needed for indirect business partners if there is "plausible information" about adverse impacts or where an indirect relationship has been put in place to avoid CS3D DD
| The proposals range from reinstating risk-based DD for the entire value chain of in-scope companies to better align EU requirements with the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (OECD Guidelines) and the UN Guiding Principles on Business and Human Rights (UNGPs), to further restricting DD only to Tier 1 business partners by deleting the Commission's wording as regards DD on indirect business partners where there is "plausible information"
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Transition Plans (TPs) | In-scope companies must adopt and put into effect a TP with the aim of ensuring, through best efforts, that the company's business model and strategy are compatible with the transition to a sustainable economy, the Paris Agreement 1.5 degrees goal and the EU's climate neutrality goal including intermediate and 2050 targets | The obligation to adopt a TP is retained but the language requiring in-scope companies to put a TP into effect is replaced with a reference to the TP containing implementing actions | The proposals range from clarifying that TPs should be implemented to replacing the requirements about the content of TPs with a reference to the relevant CSRD provisions (which require disclosure of a TP where one has already been developed by an organisation or, where a TP does not exist, information about when a TP will be adopted), and even to deleting the requirement for TPs altogether |
Liability under CS3D | Provides for an EU civil liability regime where an in-scope company intentionally or negligently fails to comply with obligations to prevent, mitigate or bring an end to an adverse impact and that non-compliance damages a protected legal interest in relation to the international human rights or environmental rights, prohibitions or obligations listed in the Directive | The Directive will be amended to remove the EU civil liability regime so that civil liability is contingent on national law provisions. The requirement for Member States to ensure that their liability rules are of overriding mandatory application in cases where the applicable law is not the national law of the Member States will be removed | Some proposals seek to reinstate the EU civil liability regime |
The EU Council's position
The EU Council has published a guidance document on the Omnibus proposals that aims to pave the way for a compromise agreement on the various proposals. Broadly, the Council Presidency suggests:
- CSRD scope – The EU Commission's proposals contained in the Omnibus Package are a "balanced approach" that both answers market demand for sustainability information while alleviating reporting burdens.
- CS3D scope of DD
- In-scope companies should conduct a more general risk mapping exercise, which would cover also indirect business partners, rather than the entity-level mapping exercise currently required by CS3D. This approach would remove the need for the Commission's provisions on “plausible information” and better align the EU's approach with the OECD Guidelines and the UNGPs.
- Companies should rely on information (and take information-gathering measures) that are reasonably available to them, when identifying and assessing adverse impacts. Regarding information gathering, this would consist of making use of 'appropriate' sources of information, such as those outlined in the OECD Guidelines.
- To protect business partners from overly burdensome information requests, in-scope companies should only request information from business partners where that information is necessary and, for business partners with fewer than 1,000 employees, cannot reasonably be obtained by other means.
- Transition Plans – The Council Presidency proposes to maintain the Commission’s proposal but to clarify that TPs under both Directives are one and the same.
- Civil liability – The Presidency seeks further information from Member States' representatives on the Council about (i) Member States' positions on whether the harmonised EU civil liability regime should remain or whether this should be governed by national law and (ii) whether the overriding mandatory application of the relevant rules should be preserved.
It is anticipated that a new Presidency compromise text will be discussed and voted on 4 June 2025 and will be the Council’s position during the negotiations with the EU Parliament on the final shape of the legislation.
Will the CS3D be scrapped?
In May 2025, a month after the new German government's coalition agreement committed to abolish its supply chain due diligence legislation, the LkSG, the German Chancellor, Friedrich Merz, also called for the EU to repeal the CS3D. The French President, Emanuel Macron, has also called for CS3D to be repealed.
Speaking at a press conference on 21 May 2025, Stéphane Séjourné, the current EU Commission Vice President for Prosperity and Industrial Strategy did not rule out the possibility of further amendments to the CS3D if the EU Council asks for it and the EU Parliament agrees However, the Danish Industry Minister, Morton Bodskov, has said Denmark, which is due to take over the Presidency of the EU Council in July, favours simplification but not the abolition of the CS3D, which aligns with the proposals in the Council's guidance document.
Parliament is divided: some far-right groups aim to repeal the CS3D entirely, while the Liberals, Socialists and the Greens want to preserve as much of the current legislation as possible. With no single political majority in the Parliament, the decisions that are reached will be the result of political cooperation and agreement. The proposal must be adopted as a single package: CSRD and CS3D are linked and cannot be separated. This means the EU legislators will need to vote on both files at the same time.
What happens next?
The draft report of the responsible EU Parliament Committee (JURI – Legal Affairs) will be presented to the Parliament by 4 June 2025. Negotiations between the political groups within the EU Parliament are expected to happen between July and October. A vote in the EU Parliament is currently scheduled for 13 October 2025. Negotiations between the EU Parliament and the Council (so-called trilogue) are anticipated between October and December. Final votes in the EU Parliament and then the Council are anticipated in December or January next year.
Postponement of additional CSRD obligations for Wave 1 companies
According to a leaked Delegated Regulation, the EU Commission is considering delaying additional requirements in the ESRS that will be phased-in for Wave 1 companies in FYs 2025 and 2026.
By way of reminder, Wave 1 companies are those that are required to report from 2025 in respect of FY 2024. The Stop-the-Clock Directive that postponed reporting requirements for all other companies, in-scope of CSRD did not apply to those in Wave 1 (see EU Commission publishes first Omnibus Package to simplify sustainability regulations).
The Commission appears to be considering delaying these additional ESRS requirements for Wave 1 companies until FY 2027 because (i) "it is not considered reasonable to require undertakings to report additional information when there is a realistic prospect that they will not subsequently have to report any information" and (ii) the ESRS are being revised and might subsequently modify the requirements that Wave 1 companies are reporting on.
The document also proposes to amend the 'phased-in disclosure requirements' so that companies with less than 750 employees would be exempt for three years from disclosing matters such as their Scope 3 emissions (per ESRS E1), the biodiversity information (ESRS E4), and workforce and value chain information (ESRS S1-S4).
As a Delegated Regulation, the EU Parliament and the EU Council do not need to vote on it although, once it is adopted by the EU Commission, they will usually have 2 months to object to it.
What is proposed regarding the ESRS?
EFRAG, which is the body that advises the EU Commission on developing sustainability reporting standards, has submitted a timetable to the EU Commission that proposes to deliver its guidance on revising and simplifying the ESRS to the Commission by 31 October 2025. EFRAG is currently gathering evidence from stakeholders, including auditors, national standard setters, investors and business associations, and analysing the Wave 1 CSRD reports published in 2025. It intends to publish consultation drafts of the amendments to ESRS in August/ September 2025.
The options for simplifying the ESRS that have been identified to date include:
Revising the content and restructuring of the approach to narrative minimum disclosure requirements in the cross-cutting standards and in the topical standards.
Clarifying how the materiality principle applies to ensure only material information is reported. EFRAG will also consider the most problematic datapoints and how it can leverage other international standards to streamline the language of the ESRS.
Evaluating reliefs across the required disclosures, including reliefs relating to acquisitions and disposals, confidential information and estimated metrics and considering an "undue cost and effort" principle.
Substantially reducing the required datapoints by identifying the least important or decision-useful ones. Some datapoints will become voluntary rather than mandatory.
NGOs challenge to EU Omnibus process
Following complaints lodged in April 2025 by eight NGOs including ClientEarth, the European Ombudswoman, Teresa Anjinho, announced on 2 May 2025 that she has opened an inquiry into how the EU Commission prepared the Omnibus proposals. The NGOs argue that the Commission breached its Better Regulation Guidelines as it failed to justify why it did not carry out a public consultation or undertake an impact assessment on the draft legislation. They also argue that the Commission should have conducted a climate consistency assessment to see if its proposals are aligned with the EU's climate neutrality target as required by Article 6(4) of the European Climate Law ((EU) 2021/1119).
The Ombudsman has asked the Commission to answer certain questions (including why it did not undertake a public consultation) and sought the provision of further information about various matters including which companies and stakeholders were invited to meetings with the Commission in early February 2025 and how they were selected.
If the Ombudsman finds that maladministration has taken place, it can make recommendations to the Commission, which then has three months to respond. If the Commission does not accept the recommendations, the Ombudsman can send a special report to the European Parliament, which may itself report on that report, However, as the current EU Parliament's calls for amendments to the CSRD and CS3D go further than those of the Commission, it seems unlikely that the Parliament would act on any such report and that this procedure will result in anything other than a formal finding of maladministration.
Conclusion
The Content Directive looks to be the subject of intense negotiations over the coming months. Views on the utility of the CS3D, in particular, are split and where the compromise text will land is difficult to predict. For companies in-scope of CSRD, the uncertainty of knowing how best to respond to the Omnibus is adding complexity and also costs to compliance, but the amendments to the ESRS hold out hope of a less burdensome reporting regime.
Want to know more?
Read our previous articles in this series:
- EU Parliament adopts Stop-the-clock Omnibus Proposal and process to simplify ESRS starts (3 April 2025)
- EU Commission publishes first Omnibus Package to simplify sustainability regulations (27 February 2025)
- EU adopts Corporate Sustainability Due Diligence Directive (CS3D) (29 April 2024)
- First European Sustainability Reporting Standards (ESRS) apply from 1 January 2024 (8 January 2024)
