EU Member Nations Consent to Enhanced Sustainability Transparency and Duty of Care, Exceeding Omnibus Plan's Proposals
On June 23, 2025, the European Council adopted its formal negotiating position on the Omnibus proposal related to the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD). The proposed changes aim to simplify regulatory requirements, reduce the number of companies subject to stringent sustainability reporting, and delay certain compliance timelines.
Key Changes to the CSDDD Scope and Substantive Requirements --------------------------------------------------------------
The Council's position shifts the CSDDD from an "entity-based approach" to a **risk-based approach**. Companies are now only required to carry out full due diligence on their direct business partners. However, if a company has "plausible information" about adverse impacts further down the value chain, it must act on that information. The legal obligation to conduct comprehensive value chain mapping is replaced by a requirement to map risks based on "reasonably available information," focusing on sectors and operations where actual or potential adverse impacts are most likely.
The Council proposes delaying the obligation for companies to adopt a climate transition plan by two years. The requirement to actually implement such plans is also eased; companies will only need to adopt a transition plan and outline implementing actions, rather than being required to execute them immediately.
Changes to the Scope of Compliance for Large Companies -------------------------------------------------------
The **scope for large companies** is significantly narrowed. Both the CSRD and CSDDD will now apply only to companies that meet **two cumulative criteria**: an employee threshold of **1,000 employees** and a net annual turnover of **€450 million**. This is a substantial increase from the previous thresholds (e.g., CSRD previously applied to companies with 250 employees and €50 million turnover or €25 million balance sheet total). This change aligns the scope of both directives, aiming to reduce complexity and overlap. Listed small and medium-sized enterprises (SMEs) are explicitly excluded from the scope of both directives under the Council’s position.
Additional Safeguards and Carve-Outs -------------------------------------
Companies can avoid disclosing information that is seriously prejudicial to the commercial position of the company, constitutes a trade secret, or is classified or otherwise legally protected. The Council narrows the obligation to seek information from value chain entities; if the information is commonly shared in the sector, there is no need to request it. Contract clauses that seek information beyond the scope of voluntary European Sustainability Reporting Standards (ESRS) from entities with fewer than 1,000 employees are not binding. There are no new reliefs from reporting under the EU Taxonomy, as the scoping thresholds themselves provide the primary reduction in regulatory burden.
Next Steps ----------
The Council’s position is now the basis for negotiations with the European Parliament, which must agree on its own position before a final text is adopted. The Parliament’s rapporteur has signaled a willingness to further reduce the scope—for example, proposing a 3,000-employee threshold and eliminating climate transition plan requirements from the CSDDD.
Summary Table: Key Changes to CSDDD and Scope for Large Companies ------------------------------------------------------------------
| Aspect | Current/Previous Requirement | Council’s Proposed Change (2025) | |---------------------------------|--------------------------------------|---------------------------------------------------| | Employee Threshold | 250 (CSRD), previously not cumulative| 1,000 (cumulative with turnover) | | Net Turnover Threshold | €50 million (CSRD) | €450 million (cumulative with employees) | | Due Diligence Scope | Entity-based, broad value chain | Risk-based, direct business partners, ‘reasonably available info’ for value chain | | Climate Transition Plan | Adoption and implementation | Adoption and outline of actions (implementation delayed by 2 years) | | Implementation Deadline | 2027 | 2028 (delayed by 1 year) | | Listed SMEs | In scope | Excluded | | Information Carve-Outs | Limited | Expanded (commercial prejudice, trade secrets, classified info) |
Conclusion ----------
The Council’s proposed negotiating position seeks to dramatically reduce the number of in-scope companies by raising both employee and turnover thresholds and by introducing additional carve-outs for sensitive information. It also shifts the due diligence requirements to a more risk-based, less burdensome approach, delays implementation timelines, and eases climate transition plan obligations. These changes are intended to lower regulatory complexity and enhance the competitiveness of European businesses while still maintaining the core purpose of the CSDDD.
- The Council's proposal for the Corporate Sustainability Due Diligence Directive (CSDDD) shifts from an "entity-based approach" to a "risk-based approach," requiring companies to conduct due diligence on their direct business partners, but also mandating action when there is "plausible information" about adverse impacts further down the value chain.
- The Council proposes delaying the obligation for companies to adopt a climate transition plan by two years and eases the requirement for implementation, allowing them to only adopt a transition plan and outline actions, rather than executing them immediately.
- The scale of companies required to comply with both the Corporate Sustainability Reporting Directive (CSRD) and CSDDD is significantly reduced, as the scope now applies only to companies that meet two cumulative criteria: an employee threshold of 1,000 employees and a net annual turnover of €450 million, a substantial increase from the previous thresholds.
