Council of the EU and EP reach provisional agreement for simplification of CSRD and CS3D requirements

The Council of the EU and European Parliament (EP) have reached a provisional agreement on the Omnibus I package on simplified rules for sustainability reporting and due diligence, as set out in the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D). The co-legislators confirmed the agreement through separate press releases. This provisional agreement follows the EP's earlier rejection of its negotiating mandate.

In relation to the CSRD, it was agreed that the scope of the sustainability reporting requirements should be reduced with listed SMEs and financial holding undertakings being removed from scope, and the employee threshold increased to 1000 with a net turnover threshold of over EUR450 million being added. A transitional exemption for "wave one" companies (being companies that had to start reporting from the 2024 financial year) was also agreed for 2025 and 2026.

In relation to CS3D, key areas of agreement include:

• Reducing the scope of due diligence on adverse impacts requirements by increasing the thresholds to 5000 employees and EUR1.5 billion net turnover.
• Broader and more flexible provisions around identification and assessment of adverse impacts.
• Removal of the obligation for companies to adopt a climate transition plan.
• A maximum penalty cap of 3% of the company's net worldwide turnover, with guidance to be provided by the European Commission and member states.
• Postponement of the transposition deadline to 26 July 2028 (meaning companies will have to comply with the new measures by July 2029).

The provisional agreement also included the introduction of a review clause to enable the possible extension of scope for both CSRD and CS3D.

The provisional agreement must now be endorsed by the co-legislators before being formally adopted. A vote was scheduled for the Legal Affairs Committee of the EP on 11 December, with Parliament due to vote on the provisional agreement during the December plenary session.

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