EU Sustainability Reporting Revamp: Key Updates to the CSRD and the CS3D from the Omnibus I Directive

On 26 February 2026, the EU published Directive (EU) 2026/470 (the Omnibus I Directive). Adopted as part of the European Commission's (Commission) simplification agenda and after a year of debates and negotiations between the Commission, the Council, and the European Parliament, this text effectuates far-reaching changes to both the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D).

This is a major development, as these two pieces of legislation are flagship texts of the EU’s Green Deal. In short, the CSRD requires certain companies operating in the EU to disclose detailed information on their sustainability performance, while the CS3D requires large companies to identify, prevent, mitigate, and report on the actual and potential negative impacts of their activities on human rights and the environment throughout their value chain.

However, as part of its efforts to increase competitiveness, the EU is removing certain reporting and due diligence obligations. Indeed, the stated objective of the Omnibus I Directive is to reduce regulatory burdens, especially on small and medium enterprises (SME), while preserving the core sustainability ambitions of both instruments. To achieve this result, the EU legislator has mainly decided to:

• Reduce the scope of application  so that fewer companies are subject to the directives.
• Streamline and simplify the required reporting and due diligence obligations.

1. Reduced scope of companies falling under the CSRD and the CS3D

The most spectacular change to the CSRD and the CS3D is certainly the reduction in the number of companies affected by reporting and due diligence obligations.

Initially, the CSRD was designed to apply gradually to different types of companies: public-interest entities (wave 1), large companies (wave 2), listed SMEs (wave 3), as well as subsidiaries and branches of third country groups with a sufficient presence in the EU (wave 4). The Omnibus I Directive puts an end to the wave- and phased-implementation system. Only large companies that meet significantly increased thresholds will be affected by sustainability reporting. This directly affects the public-interest companies that are currently subject to CSRD reporting requirements. Companies in this category that do not meet the new thresholds and are therefore not classified as large companies will not be subject to reporting requirements for financial years starting on or after 1 January 2027.

Regarding the CS3D, the thresholds have also been raised. Initially, companies with more than 1,000 employees and an annual global turnover exceeding €450 million were supposed to be subject to CS3D requirements. But the Omnibus I Directive raised those thresholds to companies with more than €1.5 billion net worldwide turnover in the financial year and 5,000 employees on average, as well as companies that have entered into certain franchise or license agreements in the EU.

2. Streamlined and simplified reporting and due diligence obligations

The second major change brought by the Omnibus I Directive concerns the amount of information that companies will have to report under CSRD. The revisions in this area are also meaningful and have some stakeholders concerned that the streamlined reporting requirements will diminish their efficacy marketwide. As previewed in our last alert, the Commission aims at simplifying the European Sustainability Reporting Standards (ESRS), which define the specific information that companies subject to the CSRD must disclose in their sustainability reports. The draft simplified ESRS were published in December 2025, and the Commission will adopt a final version of these ESRS within six months. At the same time, the EU legislator is introducing a “value-chain cap” designed to ease the administrative burden on SMEs. Companies with 1,000 employees or fewer are no longer bound to provide information to reporting companies that go beyond the scope of “voluntary standards.” The Commission will develop the content of these “voluntary standards” by 19 July 2026. Still, operators should expect these standards to be limited to the most essential and readily accessible information.

Similarly, the CS3D has been amended to reduce reporting obligations and simplify due diligence obligations. First, where possible, the Omnibus I Directive provides for an alignment of CS3D and CSRD reporting standards. Second, the due diligence exercise provided under the CS3D has been restructured to limit in part the information requests made to business partners down the supply chain.

We detail the main changes introduced by the Omnibus I Directive to the CSRD and the CS3D in the tables below.

Main changes introduced by the Omnibus I Directive

Topic	Omnibus changes to the CSRD	Omnibus changes to the CS3D
Applicability to EU companies	The CSRD now applies to EU companies with more than: €450 million in net turnover, and An average of 1,000 employees during the financial year. Public-interest companies that do not meet the above threshold will not be subject to reporting requirements for financial years starting on or after 1 January 2027.	The CS3D now applies to EU companies with more than: €1.5 billion in net worldwide turnover in the financial year, and 5,000 employees on average. The CS3D now also applies to EU companies that entered into franchising or licensing agreements in the EU: For royalties that exceeded €75 million in the last financial year, and Worldwide net turnover of €275 million in the last financial year (company or ultimate parent company).
Applicability to non-EU companies	The CSRD now applies to non-EU companies with more than €450 million of net turnover generated in the EU at group or individual level for each of the last two consecutive financial years, and €200 million of net turnover generated in the EU by a subsidiary or a branch in the preceding financial year. Public-interest companies that do not meet the above threshold will not be subject to reporting requirements for financial years starting on or after 1 January 2027.	The CS3D now applies to non-EU companies with more than: €1.5 billion in net worldwide turnover in the last financial year, and 5,000 employees. (Same criteria as for EU companies) The CS3D now also applies to non-EU companies entered into franchising or licensing agreements in the EU: For royalties that exceeded €75 million in the financial year preceding the last financial year, and Net turnover of €275 million in the EU in the year preceding the last financial year (company or ultimate parent company).
Information requests to SMEs in the value chain	Introduction of a “value-chain cap.” When reporting companies are requested information within the value chain for the purpose of their sustainability reporting, companies with 1,000 employees or fewer (“protected undertakings”) may refuse to provide information beyond voluntary standards; any contrary contractual clauses are rendered ineffective. The content of the voluntary standards remains to be defined by the Commission.	New limits on information requests to business partners. The request must be limited to what is necessary and, for partners with fewer than 5,000 employees, to information that cannot reasonably be obtained otherwise.
Reporting standards (ESRS)	As part of the streamlining of the required reporting, the Commission will adopt revised ESRS via delegated act within 6 months. This revision will ensure: Removal of less-important data points, Priority given to quantitative data, Clearer distinction between mandatory and voluntary elements, Simplification of the structure, and Better international interoperability.	In cases where CS3D reporting requirements overlap with CSRD reporting standards, the information provided for CS3D and CSRD compliance should be the same.
Transposition deadline	New transposition deadline is 19 March 2027.	New transposition deadline is 26 July 2028. Application postponed to 26 July 2029.

 

Omnibus changes specific to the CSRD
Sector-specific standards	The Commission is no longer empowered to adopt binding reporting standards that are tailored to specific sectors. Instead, it will provide non-binding sectoral guidance.
Information omitted from the reporting	Companies may now be permitted to omit certain information (e.g., serious commercial harm, trade secrets, classified information, security of legal and natural persons, protection of privacy), with disclosure of the use of the exemption and reassessment at each reporting date.
Assurance	The deadline for adopting limited assurance standards is deferred to 1 July 2027 and the obligation to adopt reasonable assurance standards is removed.
Voluntary standards	New framework for voluntary standards. These standards (also known as “sustainability reporting standards for voluntary use”) correspond to the baseline information that a reporting company can ask another company to provide. Protected undertakings do not have to provide information that exceeds the scope of these voluntary standards. The Commission will establish these voluntary standards by July 19, 2026, and review them at least every four years.

 

Omnibus changes specific to the CS3D
Due diligence	The identification and assessment of impacts is restructured in two stages: A scoping exercise based solely on reasonably available information, to identify general areas across their own operations, those of their subsidiaries and, where related to their chains of activities, those of their business partners where adverse impacts are most likely to occur. A targeted in-depth assessment focused on the areas where adverse impacts were identified to be most likely to occur and most severe.
Transition plans for climate change	Companies are no longer required to report a climate transition plan, as the prior provisions relating to the transition plan for climate change are repealed.
Pecuniary penalties	The requirement for Member States to base pecuniary penalties on the net worldwide turnover is removed. Instead, a harmonized cap of 3% of net worldwide turnover is introduced, with Commission guidelines on the setting of penalties.
Civil liability	The harmonized civil liability regime is removed. Liability is determined based on national law.
Full harmonization	To avoid “gold-plating” by the Member States (enacting additional/more stringent requirements), full harmonization is extended to a broader set of core provisions: Identification duty, Duty to prioritise adverse impacts, Duties to address adverse impacts that have been or should have been identified, Duty to provide for a complaints and notification mechanism, Duty to monitor due diligence measures, and Duty to report on the matters covered by the CS3D.

These changes reflect the global upheaval of the last year, which has led to a shift in focus to maintaining competitiveness with other jurisdictions that are also rolling back regulatory requirements, such as the United States. California and some other U.S. states are moving forward with climate-related reporting requirements, but the pullback on sustainability concerns at the federal level has been significant. Crowell & Moring lawyers continue to monitor and report on these developments as they arise. To subscribe to our alerts, please see this link.