The result of the negotiations reduces the number of entities falling in scope of the CSRD by around 90% and those falling in scope of the CS3D by around 70%. It also reduces administrative burden for in-scope companies while at the same time increasing fragmentation risks across member states, particularly on liability and enforcement of the CS3D.
Multinationals with substantial EU operations should reassess group-level exposure, reporting architectures and assurance readiness in light of the new thresholds and interpretive ambiguities.
CSRD: scope and thresholds
The scope of the CSRD applicability is narrowed to EU undertakings that both exceed an average of 1,000 employees and generate at least EUR450 million in net turnover during the financial year. These thresholds apply at the stand-alone level for individual EU entities and on a consolidated basis for EU parent undertakings. Certain financial holding companies are exempt.
For non-EU groups under Article 40a, the trigger is materially narrowed. A third-country group falls into scope only if a single EU subsidiary (or, failing that, a single EU branch) on its own exceeds EUR200m in net turnover in the prior financial year and if the third-country ultimate parent, at its group level (or, if not applicable, the individual level) generated a net turnover in the EU exceeding EUR450m for each of the last two consecutive financial years.
Notably, there is no headcount requirement in this third-country trigger. Further, the text does not clarify whether the threshold can be met on a consolidated basis at the EU subgroup level. Divergent member state interpretations are possible until the final text is transposed.
CSRD: reporting approach and value chain data
The compromise negotiated aims to embed proportionality, reduce duplication, and enhance interoperability with international standards. It emphasizes a risk-based approach to sustainability reporting, aligning the CSRD more closely with CS3D due diligence.
To further simplify and streamline sustainability reporting, the European Commission (Commission) will adopt a delegated act to revise the first set of European Sustainability Reporting Standards (ESRS). The compromise instructs that quantitative datapoints should be prioritized, and disproportionate burdens should be avoided. There is also a perception that the current ESRS lead to over-reporting due to the required level of assurance—the amendments aim to combat this.
Notably, there are now explicit limits on value chain data requests. Beyond forthcoming voluntary standards, in-scope companies would be prohibited from seeking information from value-chain entities that do not exceed 1,000 employees, subject to three carve-outs:
Companies may request additional information commonly shared within the sector.
The CSRD cap is without prejudice to information required for other legal obligations, such as CS3D due diligence or the EU Forced Labour Regulation.
The value-chain cap only applies to information gathering done for the purpose of reporting sustainability information or product-specific rules.
For the first three years of sustainability reporting, in the event information is unavailable, reporters must explain efforts undertaken, reasons for non-availability, and plans to obtain the data.
Exemptions also seek to explicitly protect know-how, disclosures which would be seriously prejudicial to the commercial position of the company in certain circumstances, intellectual property, and trade secrets.
Finally, the compromise validates the Commission’s proposal to set a framework for voluntary CSRD reporting. This may be interesting for companies below the thresholds set for mandatory reporting. The Commission must adopt a delegated act which contains such sustainability reporting standards for voluntary use within four months after entry into force of the directive.
CS3D: scope, transition plan, liability and enforcement
As with the CSRD, the agreement reached includes a material narrowing of scope. For EU companies, the thresholds are: more than 5,000 employees; and a worldwide net turnover of more than EUR1.5 billion. For non-EU companies, the EU turnover threshold also rises from EUR450m to more than EUR1.5bn. No employee threshold is set.
Notably, CS3D no longer requires companies to adopt and implement a climate change mitigation transition plan. The CSRD and ESRS requirements to disclose whether a climate transition plan is in place nonetheless continue to apply.
The EU-wide civil liability framework in Article 29 is removed, deferring to member state civil liability regimes. This change likely increases fragmentation and encourages forum shopping, with litigation risks hinging on national laws and procedural regimes. While the encouragement of representative actions at EU level will, under the omnibus approach, no longer be a feature of the CS3D, member states would remain free to maintain or introduce national mechanisms, opening the door to jurisdictional divergence.
On penalties, the maximum cap is set at 3% of the net worldwide turnover of the company or the consolidated worldwide turnover of its ultimate parent, arguably improving predictability relative to a purely principles-based approach, and reduces the original proposed ceiling of “not less than 5%.” Nevertheless, regulators retain discretion, subject to judicial review, to calibrate penalties to the facts of each case, up to the maximum cap.
Practical implications and next steps
The agreement reached materially eases CSRD reporting by narrowing content requirements and sharpening the focus on material risks, while at the same time introducing interpretive uncertainty and the potential for member state divergence.
The CS3D is substantially recalibrated—narrowing scope, replacing prescriptive, across-the-board duties with a risk-based, in-depth assessment using reasonably available information, while dropping a mandatory climate transition plan.
In practice, companies will face a leaner, more prioritization-driven due-diligence regime, but also new coordination challenges with CSRD’s value-chain caps and forthcoming ESRS revisions, particularly where data gaps, confidentiality protections, and assurance expectations intersect.
Companies now falling below the thresholds for mandatory reporting may consider opting for the new voluntary reporting framework. This may be an interesting option for companies willing to use CSRD reporting as part of a wider transition and communication strategy, though they may wish to wait for the voluntary standards to be issued to decide on the best approach.
With respect to next steps, the directive needs to be published in the Official Journal of the EU and will enter into force 20 days after its publication.
Member states must transpose the directive 12 months after entry into force, except for the amendments to the CS3D in Article 4, which must be transposed by July 26, 2028. The amendments to the CSRD apply from financial years starting on or after January 1, 2027.
The Commission is expected to adopt the revised ESRS within six months of the omnibus package amendments being entered into force.
The table below summarizes the agreement reached on the most important topics negotiated in the last few months.
