Mid December 2025, the European Parliament, European Commission and the Council of the European Union concluded their trilogue negotiations with their provisional agreement on the European Commission’s Omnibus package. Aiming to simplify the EU’s sustainability reporting framework, the Omnibus package covers, among other items, the CSRD, the CSDDD, and the EU Taxonomy Regulation. The agreement has many aims, one being to set out the scoping criteria for both the CSRD and the CSDDD. In short on the CSDDD, due diligence obligations will apply only to (i) large EU entities with more than 5,000 employees and net annual turnover exceeding EUR 1.5 billion, and (ii) non-EU entities with turnover exceeding EUR 1.5 billion generated within the EU. The remainder of this blog focuses on the updates from the CSRD’s perspective.
CSRD’s scope
Under the provisional agreement, EU entities employing an average of more than 1,000 employees and generating a net annual turnover of more than EUR 450 million will be required to conduct sustainability reporting under the CSRD. The CSRD’s obligations will also apply to non-EU entities that (i) generate more than EUR 450 million in net annual turnover within the EU at group level and (ii) have at least one EU subsidiary or branch generating turnover of more than EUR 200 million. The provisional agreement also introduces an exemption to reporting obligations for ‘financial holding companies’ as defined in the Accounting Directive. The exemption for ‘financial holding companies’ depends on an assessment of the companies’ activities; companies operating solely as holding companies and operating independently from other group companies can fall under the scope of this exemption (i.e. companies managing holdings “without involving themselves directly or indirectly in the management of those companies, without prejudice to their rights as shareholders” (art. 2(15) of the Accounting Directive)). The agreement also excludes listed medium-sized and small companies from its scope and extends the exemption for subsidiaries to all public interest entities.
Protected undertakings and value chain cap
In addition, the agreement establishes a safe haven for “protected undertakings”. This concerns companies with no more than 1,000 employees and with part of their value chain covered by the CSRD. Such companies may reject information requests from reporting companies to the extent that these requests go beyond what is specified under voluntary reporting standards. Moreover, companies reporting under the CSRD are not permitted to contractually stipulate more extensive information obligations. If a reporting company requests additional information, it must clearly inform the protected company whenever the requested information exceeds what is required under the applicable voluntary standards. It must also point out the protected company’s right to decline providing such information. These limitations apply solely to information requests made for the reporting company’s sustainability reporting. Information requests made for other legitimate purposes remain permitted. Furthermore, the agreement introduces a three‑year transitional period during which companies may explain why they have been unable to obtain all required information from their value chain and outline the measures they intend to take to secure this information going forward.
ESRS and assurance
The agreement removes the power of the European Commission to adopt sector-specific European Sustainability Reporting Standards. By way of alternative, the agreement provides the European Commission with the power to issue guidelines. In addition, the previously envisaged requirement to obtain reasonable assurance on sustainability reporting has been removed. As a result, only the obligation to obtain limited assurance under the CSRD remains.
Taxonomy Regulation
Companies that continue to fall under the tightened scope of the CSRD must still comply with Article 8 of the Taxonomy Regulation. Under this provision, companies preparing sustainability reports pursuant to the CSRD are also obliged to disclose to what extent their activities classify as environmentally sustainable within the meaning of the Taxonomy Regulation.
Transitional arrangement
For the financial year 2024, the first group of companies (i.e. the ‘first-wave companies’) was already required to publish sustainability reports under the CSRD. Based on the provisional agreement, Member States may now introduce a transitional arrangement for the large public-interest companies that no longer fall under the stricter scope. These companies would not be required to comply with the CSRD reporting obligations for the 2025 and 2026 financial years. The companies classified as large public-interest companies that continue to fall under the CSRD’s scope must still prepare and publish sustainability reports for both financial years 2025 and 2026.
What is next?
The final text still has to be formally adopted by the Council of the European Union. Eventually, the directive will enter into force 20 days after its publication in the Official Journal of the European Union. For more information, please see the full text and text press release available here and here. In practice, we see that CSRD-related questions are not solely raised with auditors. Our ESG team, too, is actively involved in providing legal interpretation as additional advice to analyses of auditors.
Mid December 2025, the European Parliament, European Commission and the Council of the European Union concluded their trilogue negotiations with their provisional agreement on the European Commission’s Omnibus package. Aiming to simplify the EU’s sustainability reporting framework, the Omnibus package covers, among other items, the CSRD, the CSDDD, and the EU Taxonomy Regulation. The agreement has many aims, one being to set out the scoping criteria for both the CSRD and the CSDDD. In short on the CSDDD, due diligence obligations will apply only to (i) large EU entities with more than 5,000 employees and net annual turnover exceeding EUR 1.5 billion, and (ii) non-EU entities with turnover exceeding EUR 1.5 billion generated within the EU. The remainder of this blog focuses on the updates from the CSRD’s perspective.
CSRD’s scope
Under the provisional agreement, EU entities employing an average of more than 1,000 employees and generating a net annual turnover of more than EUR 450 million will be required to conduct sustainability reporting under the CSRD. The CSRD’s obligations will also apply to non-EU entities that (i) generate more than EUR 450 million in net annual turnover within the EU at group level and (ii) have at least one EU subsidiary or branch generating turnover of more than EUR 200 million. The provisional agreement also introduces an exemption to reporting obligations for ‘financial holding companies’ as defined in the Accounting Directive. The exemption for ‘financial holding companies’ depends on an assessment of the companies’ activities; companies operating solely as holding companies and operating independently from other group companies can fall under the scope of this exemption (i.e. companies managing holdings “without involving themselves directly or indirectly in the management of those companies, without prejudice to their rights as shareholders” (art. 2(15) of the Accounting Directive)). The agreement also excludes listed medium-sized and small companies from its scope and extends the exemption for subsidiaries to all public interest entities.
Protected undertakings and value chain cap
In addition, the agreement establishes a safe haven for “protected undertakings”. This concerns companies with no more than 1,000 employees and with part of their value chain covered by the CSRD. Such companies may reject information requests from reporting companies to the extent that these requests go beyond what is specified under voluntary reporting standards. Moreover, companies reporting under the CSRD are not permitted to contractually stipulate more extensive information obligations. If a reporting company requests additional information, it must clearly inform the protected company whenever the requested information exceeds what is required under the applicable voluntary standards. It must also point out the protected company’s right to decline providing such information. These limitations apply solely to information requests made for the reporting company’s sustainability reporting. Information requests made for other legitimate purposes remain permitted. Furthermore, the agreement introduces a three‑year transitional period during which companies may explain why they have been unable to obtain all required information from their value chain and outline the measures they intend to take to secure this information going forward.
ESRS and assurance
The agreement removes the power of the European Commission to adopt sector-specific European Sustainability Reporting Standards. By way of alternative, the agreement provides the European Commission with the power to issue guidelines. In addition, the previously envisaged requirement to obtain reasonable assurance on sustainability reporting has been removed. As a result, only the obligation to obtain limited assurance under the CSRD remains.
Taxonomy Regulation
Companies that continue to fall under the tightened scope of the CSRD must still comply with Article 8 of the Taxonomy Regulation. Under this provision, companies preparing sustainability reports pursuant to the CSRD are also obliged to disclose to what extent their activities classify as environmentally sustainable within the meaning of the Taxonomy Regulation.
Transitional arrangement
For the financial year 2024, the first group of companies (i.e. the ‘first-wave companies’) was already required to publish sustainability reports under the CSRD. Based on the provisional agreement, Member States may now introduce a transitional arrangement for the large public-interest companies that no longer fall under the stricter scope. These companies would not be required to comply with the CSRD reporting obligations for the 2025 and 2026 financial years. The companies classified as large public-interest companies that continue to fall under the CSRD’s scope must still prepare and publish sustainability reports for both financial years 2025 and 2026.
What is next?
The final text still has to be formally adopted by the Council of the European Union. Eventually, the directive will enter into force 20 days after its publication in the Official Journal of the European Union. For more information, please see the full text and text press release available here and here. In practice, we see that CSRD-related questions are not solely raised with auditors. Our ESG team, too, is actively involved in providing legal interpretation as additional advice to analyses of auditors.