On Dec. 9, 2025, the Council of the EU (Council)’s Presidency and European Parliament (Parliament)’s negotiators reached a provisional agreement to simplify sustainability reporting and due diligence requirements (Provisional Agreement). The Provisional Agreement opens the way to simplifying the EU directives on corporate sustainability reporting (CSRD) and corporate sustainability due diligence (CSDDDD).
For background, in February 2025, the European Commission (Commission) published the so-called “EU Omnibus Package” Commission Proposal. The EU Omnibus Package aims at reducing the administrative burden for businesses operating in the EU by easing compliance requirements under several key EU environmental, social, and governance laws, with a special focus on the CSRD and the CSDDD. In June 2025, Member States’ representatives agreed on the Council’s negotiating mandate to simplify sustainability reporting and due diligence requirements to boost EU competitiveness (Council Proposal). Among other things, in contrast to the Commission Proposal, the Council Proposal included an increase in the turnover threshold for so-called “Wave 2 Companies” of the CSRD to EUR 450 million, and an increase of the CSDDD scope to 5,000 employees and a net turnover of EUR 1.5 billion for EU companies.
On Nov. 13, 2025, the Parliament adopted the EU Omnibus Package – subject to extensive amendments (Parliament Proposal). The Parliament Proposal was then forwarded to the Parliament’s Committee on Legal Affairs to initiate trilogue negotiations with the Council and the Commission at the end of November 2025.
This GT Alert provides an overview of the key proposed changes to the EU Omnibus Package amending the CSRD and the CSDDD as outlined in the Provisional Agreement. It must be noted that the final agreed text of the Provisional Agreement has not yet been published, and we may see certain amendments further in the legislative process. Given that the final text of the Provisional Agreement is not yet out, this GT Alert is based on press releases of the EU co-legislators.
Key Proposed Changes
Amendments to CSRD
- Application scope for EU companies: The CSRD’s scope of application would be limited to companies with an average of over 1,000 employees and an annual net turnover of at least EUR 450 million. Due to the Stop-The-Clock Regulation (see our previous GT Alert), which was fast-tracked and already entered into force in April 2025, (former) Wave 2 Companies will now only have to report on financial year 2027 in 2028. Further, public interest companies (so-called Wave 1 Companies) that had to start reporting from the 2024 financial year onwards will not have to report for the 2025 and 2026 financial years, aligning the reporting timings with those of Wave 2 Companies. Publicly listed small and medium sized entities (SMEs) that do not meet these thresholds shall – other than the current legislation – are completely removed from the scope. In contrast to the Commission Proposal, which proposed increasing the employee threshold from 250 employees to 1,000 employees, the Provisional Agreement with the additionally required EUR 450 million annual net turnover significantly uplifts the threshold of the current CSRD scope.
- Application scope for non-EU companies: For non-EU companies with subsidiaries or branches in the EU, the threshold applicable for such subsidiary or branch to be subject to the CSRD reporting obligations shall be a net turnover of at least EUR 450 million. However, it is unclear at this point whether this turnover threshold refers to turnover generated in the EU. Furthermore, it is not yet clear if there are certain thresholds needing to be met by the subsidiaries or the branches of these non-EU companies.
- Exemption for financial holding companies: EU financial holding companies (companies that have the sole purpose of acquiring and managing shares in other companies, without directly or indirectly being involved in the management of those companies) shall be fully exempt from CSRD reporting obligations. The subsidiaries of these companies, on the other hand, may be subject to reporting requirements.
- Assurance Standard: The Provisional Agreement aims to set the CSRD assurance standard to limited assurance.
- Application scope: The thresholds determining which companies are in the CSDDD’s scope shall be raised to a minimum of 5,000 employees and a net turnover of more than EUR 1.5 billion for EU companies. Further, the Provisional Agreement sets the threshold at EUR 1.5 billion net turnover in the EU for non-EU companies, regardless of the number of employees.
- Transposition deadline and enter into force: The CSDDD’s transposition deadline is postponed by another year to July 26, 2028. Companies will only have to comply with the new measures by July 2029.
- Lapse of climate transition plan obligation: The Provisional Agreement fully eliminates the obligation for companies to adopt a transition plan for climate change mitigation to make their business model compatible with the Paris Agreement.
- Risk-based approach to due diligence: Other than the Commission Proposal, the Provisional Agreement shifts to a fully risk-based due diligence approach without distinguishing between supply-chain tiers. Companies would conduct an initial scoping exercise using only “reasonably available information,” meaning data obtainable from internal or existing external sources without contacting business partners. Further assessment is required only where relevant and verifiable information suggests likely and severe adverse impacts, allowing companies to prioritize direct business partners when appropriate.
- Penalty: Parliament and Council agreed on reducing pecuniary penalties to a maximum of 3% of a company’s net worldwide turnover.
Amendments to CSDDD
The Provisional Agreement includes a review clause regarding a potential expansion of the scope of both the CSRD and the CSDDD.
Outlook
The Provisional Agreement reached during the trilogue negotiations now requires both the Parliament and the Council’s formal approval. Once the two co-legislators adopt the agreement, the amendments will be published in the Official Journal of the European Union and may enter into force on the 20th day following publication. Whilst the Legal Affairs Committee voted on the provisional agreement on Dec. 11, 2025, the EU Parliament will vote on it during its plenary session on Dec. 16, 2025, in Strasbourg. The Council has not yet confirmed a date on which it will give its final approval.