This decision is part of the "Omnibus I" package adopted by the Commission on February 26, 2025, to simplify EU sustainability legislation. The Council has treated this proposal as a top priority given its significant impact on the economy. But what would these proposed changes mean for companies currently preparing for the new requirements?
The Path to Final Adoption Is Not Yet Complete
While the Council's decision marks an important milestone, the legislative process is not yet finished. The Council Presidency will now enter negotiations with the European Parliament once it has adopted its position.
Experience shows that significant changes can still occur during the trilogue procedure between the Commission, Council, and Parliament. A final agreement is expected by the end of 2025. Companies should continue to closely monitor these developments and maintain flexibility in their strategies.
Member States that have already begun implementing the original directives would need to adapt their national laws should the proposals be finally adopted. This could lead to an inconsistent transition phase where different regulations exist in parallel.
For internationally operating companies, this would mean additional complexity. They would need to monitor developments in all relevant markets and align their compliance strategies accordingly.
The Proposed CSRD Changes in Detail
Significantly Higher Thresholds Could Relieve Mid-Sized Companies
The EU Council's proposed changes to the CSRD build on the Commission's proposal. The Commission had proposed raising the threshold to 1,000 employees and excluding listed SMEs from the scope. As part of its mandate, the Council has added an additional net revenue threshold of over €450 million.
Additionally, the Council proposes a combined revenue threshold of €450 million. Companies would need to meet both criteria to fall under the CSRD. This "and" conjunction would represent a fundamental change that could particularly relieve personnel-intensive companies with moderate revenues.
Listed SMEs Could Breathe Easier
A particularly far-reaching decision concerns listed small and medium-sized enterprises (SMEs): Under the Council's proposal, they would be completely removed from the CSRD's scope. This would mean that even capital market-oriented companies below the new thresholds would no longer have mandatory sustainability reporting obligations.
However, these companies should consider that investors and other stakeholders increasingly demand sustainability information. Voluntary reporting according to the VSME standard would therefore still make sense to secure competitive advantages and access to sustainable financing.
The Review Clause as a Potential Backdoor?
The Council's mandate also introduces a review clause concerning a possible extension of the scope to ensure adequate availability of companies' sustainability information. Companies should keep an eye on this development, as a renewed expansion of reporting obligations cannot be ruled out in the medium term.
CSDDD: Focus on the Largest Companies
Drastic Increase in Thresholds in Sight
The proposed changes to the Corporate Sustainability Due Diligence Directive (CSDDD) – also known as CS3D – would be even more significant. The thresholds would rise to 5,000 employees and €1.5 billion in revenue. This would focus due diligence on Europe's truly large corporations.
This massive increase would significantly reduce the number of affected companies. Estimates suggest that fewer than 3,000 companies EU-wide would then fall under the directive – originally it was supposed to be more than 15,000.
From Company-Based to Risk-Based Approach
A paradigm shift would occur in the approach to due diligence obligations. The Council's mandate shifts the focus from a company-based approach to a risk-based approach, focusing on areas where actual and potential negative impacts are most likely to occur. Companies would need to concentrate on areas with the highest potential negative impacts rather than monitoring their entire supply chain uniformly. Due diligence obligations would generally be limited to the company's own business activities, those of its subsidiaries, and those of its direct business partners ("Tier 1").
This change would allow companies to use their resources more efficiently. At the same time, responsibility would remain: The identification and assessment obligations would be extended if objective and verifiable information indicates negative impacts beyond direct business partners. Additionally, the Council's mandate introduces a review clause concerning a possible extension of these obligations beyond "Tier 1."
Climate Transition Plans Remain Mandatory – With Postponement
The Commission's proposal simplifies the provisions on climate transition plans by aligning them with the CSRD. The Council limits companies' obligation to adopting a climate transition plan. To give companies sufficient time for adequate preparation, the Council postpones the obligation to adopt transition plans by two years.
Civil Liability Would Be Eliminated
The Commission proposes to delete the EU's harmonized liability regime. The Council's mandate maintains this Commission proposal. This would mean further simplification for companies.
The Council's mandate also postpones the CSDDD implementation deadline by one year, i.e., until July 26, 2028. This would provide both Member States and companies with additional room for careful preparation.
What Does This Mean for Corporate Practice?
No Time to Rest
The potential simplifications may seem like a breathing space at first glance, but companies should not lull themselves into a false sense of security. The requirements from customers, suppliers, banks, and investors remain – regardless of legal thresholds.
Companies in supply chains of larger corporations will particularly continue to face sustainability inquiries. The large companies that would fall under the CSRD will request sustainability data from their suppliers to fulfill their own reporting obligations.
Strategic Advantages Through Proactive Action
Companies that now invest in sustainable processes and reporting systems can benefit in multiple ways:
- Competitive advantages in tenders and customer acquisition
- Better access to sustainable financing and funding
- Efficiency gains through optimized processes and resource use
- Risk minimization through early identification of sustainability risks
The Role of Digital Solutions
The complexity of sustainability reporting – even in simplified form – makes the use of specialized software solutions almost indispensable.
It is crucial to rely on flexible systems that can adapt to changing regulatory requirements. Current developments make it clear that EU sustainability regulation is subject to constant change. Companies therefore need solutions that can keep pace with these changes.
This is exactly where our Sustainability Management Platform (SMP) comes in
Through its modular structure, it can react flexibly to legislative changes – as soon as the final Omnibus regulations are adopted, the affected modules will be adjusted accordingly. This way, companies remain compliant at all times without having to rebuild their entire reporting structure. The SMP offers a holistic approach that combines all relevant sustainability aspects in a single tool – from TÜV-certified calculation of transport emissions to Corporate Carbon Footprints to AI-based Product Carbon Footprint analyses.
This integrated approach is particularly valuable, as standardized sustainability certificates will continue to be demanded by suppliers, customers, and investors – regardless of whether a company falls below the legal thresholds or not.
Conclusion
The simplifications to CSRD and CSDDD proposed by the EU Council could mean significant relief for the European economy. Raising the thresholds would free thousands of companies from mandatory reporting obligations and concentrate requirements on the largest economic actors.
Nevertheless, it would be a mistake to interpret these potential developments as a signal to ease sustainability efforts. Market requirements and stakeholder expectations remain high. Companies that invest in efficient sustainability processes and systems now will have a long-term advantage.
The potentially extended transition periods offer the opportunity to build sustainability strategies in a structured manner without excessive time pressure. Use this time to establish robust processes that not only meet regulatory requirements but create real value for your company. Because one thing is certain: the transformation to a sustainable economy is irreversible – the question is only whether your company actively shapes it or is driven by it.