What the CSRD Omnibus means for businesses

As of February 2025, the European Commission introduced the "CSRD Omnibus," a proposal to update the Corporate Sustainability Reporting Directive (CSRD). After a year of negotiations, the Omnibus was formally adopted by the Council of the EU on 24 February 2026 and published in the Official Journal as Directive (EU) 2026/470 on 26 February 2026, entering into force on 18 March 2026. This is no longer a proposal — it is now law.

The directive significantly recalibrates CSRD obligations, reducing which businesses must report and easing the compliance burden for those that remain in scope.

Below, we've kept our original guide on CSRD intact but updated it throughout to reflect the final Omnibus changes, so you can see how they affect your compliance strategy.

What Is CSRD?

The Corporate Sustainability Reporting Directive (CSRD) is an EU regulation designed to enhance transparency in corporate sustainability reporting. It replaces the Non-Financial Reporting Directive (NFRD) and requires companies to disclose their environmental, social, and governance (ESG) performance in a standardised, comparable manner. The directive is closely tied to the EU Green Deal, pushing businesses across Europe towards more sustainable practices and consistent reporting.

What's changed under the CSRD Omnibus:

• The original CSRD thresholds have been substantially updated. Instead of catching almost every large firm with at least 250 employees, the Omnibus now restricts scope to companies with 1,000+ employees and €450 million+ net turnover — both thresholds must be met.
• Listed SMEs are now out of scope and no longer face mandatory reporting.
• Sector-specific ESRS standards have been dropped entirely.

These changes aim to reduce compliance burdens while still advancing the EU's sustainability agenda.

Who Does CSRD Apply To, and How To Tell If You Need To Comply?

Original CSRD Criteria (Pre-Omnibus)

If a company met two out of three of these criteria, it had to comply:

• More than 250 employees
• Annual turnover exceeding €50 million
• Total assets over €25 million

CSRD Omnibus Changes

Under the final directive, only companies meeting both of these criteria must report:

• More than 1,000 employees
• Net turnover exceeding €450 million

This represents an approximately 80% reduction in mandatory coverage compared to the original CSRD. If you no longer meet both of these new thresholds, you fall out of scope for financial years starting on or after 1 January 2027.

Does CSRD Apply to SMEs?

Original Scope

Listed SMEs were previously within CSRD's scope, with simplified reporting standards. Non-listed SMEs were exempt but could be indirectly affected if they operated within the supply chains of larger companies bound by CSRD.

Omnibus Update

Under the Omnibus, all SMEs (listed or not) are out of scope for mandatory reporting. Listed SMEs gain a major reprieve. However, you may still choose to adopt the Voluntary SME (VSME) framework if demonstrating sustainable practices is important for your investors or clients.

SMEs also benefit from:

• Full exemption from mandatory reporting requirements.
• Reduced pressure from larger companies, as supply chain reporting requirements have been scaled back.
• New "protected undertaking" status (see below).

What Is a "Protected Undertaking"?

The Omnibus introduces an important new concept for smaller businesses. A "protected undertaking" is any company with fewer than 1,000 employees that sits within the value chain of a larger business required to report under CSRD.

Protected undertakings have the legal right to refuse information requests from reporting companies that go beyond what would be required under voluntary sustainability standards. Importantly, any contractual provisions that demand more extensive information are not binding. This gives meaningful protection to mid-market and smaller businesses that have historically faced pressure to supply detailed ESG data to their larger customers or partners.

If you are a supplier or subcontractor to a large in-scope company, this provision directly limits what they can legally ask of you.

Does CSRD Apply to Non-EU Companies?

Yes, it continues to apply if you generate more than €450 million in net turnover within the EU for each of the last two consecutive financial years, and have either:

• An EU subsidiary with more than €200 million net turnover, or
• A branch generating more than €200 million within the EU.

Omnibus Impact: The final directive raises the non-EU parent threshold substantially — from €150 million in EU turnover (with a €40 million branch threshold) to €450 million, with a new €200 million subsidiary/branch floor. If your EU operations previously brought you into scope but no longer meet these revised figures, you may now fall out of mandatory reporting.

When Does CSRD Come Into Effect?

Revised Timeline (Post-Omnibus)

The timeline has been significantly restructured. The key dates under the final directive are:

• Wave 1 — Large public interest entities already reporting under NFRD. First report: 2025 (already underway), covering FY2024 data.
• Wave 1 (continuing) — Wave 1 companies still above new thresholds (1,000+ employees and €450M+ turnover). Next report: 2026, covering FY2025 data.
• Wave 1 (exiting scope) — Wave 1 companies that fall below the new thresholds. Member States may exempt these companies for FY2025 and FY2026. Mandatory exit from scope for FY2027 onwards.
• Wave 2 — Large companies newly in scope under the original CSRD, meeting the new thresholds. First report: 2028, covering FY2027 data.
• Wave 3 — Listed SMEs. Fully exempt. No mandatory reporting.
• Non-EU parents — Third-country companies meeting new EU turnover thresholds. First report: 2029, covering FY2028 data.

Member State transposition: EU member states have until 18 March 2027 to transpose the directive's CSRD provisions into national law. The timing of national-level implementation may affect when certain exemptions become available in your jurisdiction.

Does CSRD Apply to the UK?

Although the UK is no longer part of the EU, CSRD can still affect UK-based companies if:

• They have subsidiaries or branches in the EU meeting CSRD thresholds.
• They supply goods or services to EU-based clients who request ESG data.

UK SDR Alignment: The UK is developing its own Sustainability Disclosure Requirements (SDR). While the Omnibus doesn't directly alter UK SDR, it's wise to stay updated on both regimes if you operate across borders.

Is CSRD Mandatory?

CSRD remains a legal obligation for large companies with 1,000+ employees and €450 million+ net turnover. However, listed SMEs, many mid-sized firms, and smaller businesses are now outside mandatory scope, greatly reducing the overall compliance burden.

For those that were previously in scope under Wave 1 but now fall below the new thresholds, the position is more nuanced. Member States may issue transitional exemptions covering FY2025 and FY2026, but you should monitor the position in your specific jurisdiction, as this requires national legislative action and may not be in place immediately.

Why Is CSRD Important?

Enhanced AccountabilityCSRD standardises ESG reporting, making it easier for investors and policymakers to compare sustainability performance.

Support for the EU Green DealBy 2050, the EU aims for climate neutrality. CSRD pushes businesses to adopt more responsible models, though the Omnibus softens obligations for smaller players.

Better Decision-MakingHigh-quality ESG data allows companies to identify long-term risks, from climate impacts to regulatory shifts.

Investor ConfidenceTransparent sustainability metrics attract sustainable investment funds and can improve market positioning.

What Is "Double Materiality" in CSRD?

CSRD's "double materiality" requires companies to examine:

• Financial Materiality: How do sustainability issues affect the company's financial performance?
• Impact Materiality: How does the company's business model affect the environment and society?

Under the Omnibus, double materiality remains a central principle. The revised European Sustainability Reporting Standards (ESRS) introduce a streamlined, top-down approach with clearer criteria and fewer mandatory data points. Materiality assessments no longer need to be conducted every year, and the expectation has shifted from volume of disclosure to quality of judgement.

What's Changing with the Reporting Standards (ESRS)?

The European Sustainability Reporting Standards (ESRS) — which define exactly what in-scope companies must disclose — are being substantially revised. EFRAG submitted simplified Amended ESRS to the European Commission in late 2025, cutting mandatory data points by 61% and removing all voluntary data points across all 12 standards.

The revised ESRS are expected to be formally adopted by the Commission via a delegated act by mid-2026 (within six months of the directive entering into force). They will apply from financial years beginning on or after 1 January 2027, with optional early use for FY2026.

Key changes in the simplified ESRS include:

• A 61% reduction in mandatory data points, focusing on disclosures most relevant to investors and decision-makers.
• Removal of all voluntary data points.
• A streamlined double materiality process with a top-down approach and clearer criteria.
• Greater flexibility to use estimates for value chain data, reducing pressure to collect direct data from suppliers.
• Improved interoperability with the ISSB's global sustainability standards (IFRS S1 and S2).
• Sector-specific ESRS standards have been dropped entirely.

Until the revised ESRS delegated act is formally adopted, Wave 1 companies must continue applying the original ESRS Set 1.

Does CSRD Require Scope 3 Emissions Reporting?

Yes, but only if Scope 3 is material. This can include:

• Supplier operations
• Product use and disposal
• Business travel
• Waste management

For companies still in scope (i.e., large firms with 1,000+ employees and €450M+ net turnover), Scope 3 remains important but can be more narrowly defined under the revised ESRS if it isn't materially significant. The new standards also allow greater use of estimates for value chain data, reducing the burden of direct supplier data collection.

What Are the Penalties for Non-Compliance With CSRD?

Penalties vary by EU member state but typically include:

• Financial Fines: Scaled to the severity and duration of non-compliance. The Omnibus introduces a cap: financial penalties imposed by national supervisory authorities are limited to 3% of the entity's net worldwide turnover in the preceding financial year.
• Legal Actions: Regulatory scrutiny and enforcement measures.
• Reputational Harm: Losing investor and consumer trust.
• Lost Business Opportunities: Difficulty accessing public procurement or sustainable investment capital.

Fewer businesses will be subject to these penalties under the revised scope, but the penalty framework itself remains in place for those that are.

How Should Companies Prepare for CSRD Compliance?

Conduct a Scope AssessmentCheck which threshold applies to you under the new rules: 1,000+ employees AND €450 million+ net turnover. If you were in Wave 1 but now fall below the new thresholds, monitor your Member State's position on the transitional exemption for FY2025 and FY2026.

Implement Robust Data CollectionWhile the Omnibus reduces reporting demands, large in-scope companies still need reliable ESG data. This includes Scope 1, 2, and (if material) Scope 3. The revised ESRS allow greater use of estimates for value chain data, which helps.

Update Your Double Materiality AssessmentThe revised ESRS introduce a streamlined, top-down approach. Your existing materiality assessment may need updating to reflect new definitions, aggregation options, and the clearer ability to omit non-material topics. Assessments no longer need to be redone annually.

Develop a Reporting StrategyAlign with the revised ESRS once the delegated act is published (expected mid-2026). Focus on double materiality, but expect fewer mandatory metrics and simpler requirements overall.

Ensure Governance and AssuranceLimited assurance stays in place, meaning you should still prepare for third-party reviews of your ESG data. The push towards stricter assurance requirements has been deferred.

Engage StakeholdersEven if you fall out of mandatory scope, voluntary ESG disclosure can be a market differentiator, especially if large clients or investors still demand sustainability data.

Know Your Rights in the Value ChainIf you have fewer than 1,000 employees and are receiving data requests from larger customers, you may qualify as a protected undertaking. Understanding this right can help you push back on requests that exceed voluntary standards.

Leafr Can Help You Prepare for CSRD

At Leafr, we specialise in cutting through complexity so that you can stay on top of sustainability obligations — without over-investing if you're no longer in scope. Our network of vetted consultants offers:

• Bespoke Talent: Sustainability experts with proven results in your sector.
• Efficient Tools: Carbon accounting and ESG platforms tailored to the newly simplified reporting rules.
• Hands-On Support: A roadmap for meeting EU standards, focusing on material issues, and navigating any data collection hurdles.

Whether you remain under CSRD or you're assessing a voluntary approach, get in touch to seize the opportunities that smart ESG strategies bring.

Key Takeaways

• Omnibus Is Now Law: Directive (EU) 2026/470 entered into force on 18 March 2026. This is no longer a proposal.
• Scope Dramatically Reduced: CSRD now targets companies with 1,000+ employees AND €450M+ net turnover — roughly 80% fewer businesses than under the original directive.
• SMEs Out: Listed and non-listed SMEs are exempt from mandatory reporting. Voluntary frameworks such as VSME can still help them stand out with investors and clients.
• Protected Undertakings: Companies with fewer than 1,000 employees in the supply chain of a reporting company can legally refuse data requests that go beyond voluntary standards.
• Revised Timelines: Wave 2 companies now report for the first time in 2028 (FY2027). Wave 1 companies exiting scope may benefit from Member State transitional exemptions for FY2025 and FY2026.
• Simplified ESRS: Mandatory data points cut by 61%. Revised standards expected mid-2026, applying from FY2027 with optional early use in FY2026. Sector-specific standards dropped.
• Limited Assurance: The move to stricter audits is off the table, saving companies time and money.
• Reporting Still Matters: Even if you're out of mandatory scope, robust ESG data is increasingly a competitive advantage for investors and clients.

CSRD has evolved into a more targeted and less burdensome regime. Keep tracking your sustainability metrics, anticipate client or investor needs, and stay alert for Member State transposition in your jurisdiction. Being prepared now ensures you won't be caught off guard when the new rules take full effect.

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