EU Approves Simplified Sustainability Reporting Framework Under Omnibus Package
24 February 2026 — The European Union has given final approval to a legislative package simplifying sustainability reporting and due diligence requirements, marking a significant recalibration of the EU’s corporate sustainability framework.
On 24 February 2026, EU member states, acting through the Council of the European Union, signed off on the so called Omnibus I package, which amends key elements of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The decision represents the final step in the legislative process following earlier approval by the European Parliament and is intended to reduce reporting burdens and enhance EU competitiveness.
Under the adopted amendments, the scope of mandatory sustainability reporting is significantly narrowed. The CSRD will now apply primarily to companies with more than 1,000 employees and annual net turnover above €450 million, substantially reducing the number of entities subject to mandatory reporting requirements. The CSDDD is similarly scaled back, with higher thresholds introduced for employee numbers and turnover, and a more focused approach to due diligence obligations.
The legislative changes are accompanied by the simplification of the European Sustainability Reporting Standards (ESRS), following a mandate to streamline and reduce the volume and complexity of required disclosures. According to the Council, the revised framework aims to introduce more proportionate, targeted and flexible reporting requirements, while limiting the “trickledown” effect of data requests on smaller companies within value chains.
Key Simplifications in ESRS
- 61% Reduction in Data Points: A significant decrease in the number of required data points aims to reduce the administrative burden.
- "Fair Presentation" Framework: The focus shifts from strict compliance to "fairly presenting" material sustainability information, allowing for more strategic reporting.
- Reduced Value Chain Reporting: The need for direct data from the entire value chain is reduced, with more flexibility on how to report on non-controlled entities.
- Streamlined Materiality Assessment: Clearer, less prescriptive rules on materiality allow companies to focus on what is truly relevant, reducing the need for detailed reporting on immaterial topics.
- Materiality Focus: Strengthening the "double materiality" approach to focus only on essential sustainability information.
- Interoperability: Better alignment with international standards (IFRS).
- Simplified General Disclosures (ESRS 2): Overlaps with topic standards have been removed, making it clearer what must be disclosed regarding policies, actions, and targets.
- Optionality and Flexibility: Increased use of "may" instead of "shall" in certain areas, with more options for formatting, such as using appendices for detailed data.
- Improved Structure: Methodological information (Application Requirements) is now directly linked in boxes below the relevant disclosures for better user-friendliness.
Simplified ESRS Reporting Timeline
- Wave 1 (Already In-Scope): Large listed companies, banks, and insurance companies (approx. >500 employees) that were already covered by NFRD.
- 2025 (Reporting on FY 2024): Reported under original ESRS.
- 2026–2027 (Reporting on FY 2025-2026): Continue under original ESRS, but with "quick-fix" amendments and extended transitional reliefs.
- 2028 (Reporting on FY 2027): Expected to adopt the new, simplified ESRS.
- Wave 2 (Delayed): Other large EU undertakings (>250 employees and/or certain turnover/assets).
- Original Timeline: 2026 (reporting on 2025 data).
- New Timeline: 2028 (reporting on 2027 data).
- Framework: Will likely start directly with the simplified ESRS.
- Wave 3 (Delayed/Reduced): Listed SMEs.
- Original Timeline: 2027 (reporting on 2026 data).
- New Timeline: 2029 (reporting on 2028 data).
Note: Sustainability reporting for non-listed SME companies (typically <250 employees, but up to 1000 in some contexts) is covered under the Voluntary Sustainability Reporting Standard for non-listed Small and Medium-sized Enterprises (VSME) launched in July 2025.
The amendments are set out in Directive (EU) 2026/470, which updates existing EU sustainability reporting and due diligence legislation and will enter into force following publication in the EU’s Official Journal, after which member states will be required to transpose the changes into national law.
The adoption of the simplified framework underscores an important shift in the EU’s sustainability reporting landscape, balancing the continued objective of high-quality, decision-useful sustainability information with a renewed emphasis on proportionality, feasibility and regulatory efficiency.