15 Key Details to Know - A summary by Ropes & Gray
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In the wee hours of this morning in Europe, the Legal Affairs Committee Members of the European Parliament and the European Council reached a provisional political agreement on the Omnibus I package amending the EU’s Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive. The CSRD and CSDDD will be substantially “simplified” from the current Directives and the European Commission’s Omnibus proposal. This post discusses the details of the political agreement described in the Parliament and Council press releases.
The Earlier Proposals
The Council’s negotiating position adopted over the summer is discussed in this Ropes & Gray post.
The Parliament’s November negotiating position is discussed here. The earlier position adopted by the Parliament’s Legal Affairs Committee, which ultimately was rejected by the Parliament, is discussed in this Ropes & Gray post.
The original Commission Omnibus proposal from February is discussed here.
Corporate Sustainability Reporting Directive
- Reporting will be required for EU companies with over 1,000 employees on average and net annual turnover of more than €450 million. According to some sources, this change will reduce the number of in-scope companies by approximately 90%. The political agreement aligns with the Council’s negotiating position. The Parliament had advocated for a 1,750 employee threshold.
- The EU net turnover threshold for non-EU companies will be €450 million.
- Financial holding undertakings will be exempt.
- There will be a transition exemption for companies that had to report starting with the 2024 financial year (“wave one” companies) falling out of scope for 2025 and 2026.
- Smaller companies with less than 1,000 employees will not be required to report information that goes beyond the voluntary European Sustainability Reporting Standards.
- Sector-specific reporting will be voluntary.
- There will be a review clause concerning a possible extension of the scope of the CSRD.
- The European Commission will create a digital portal for businesses with access to templates and guidelines on EU and national reporting requirements.
Corporate Sustainability Due Diligence Directive
- The CSDDD transposition deadline will be postponed by another year, to July 26, 2028. Companies will have to comply starting July 2029. This further extension was part of the Council’s negotiating position.
- EU companies with more than 5,000 employees and net annual turnover of more than €1.5 billion will be subject. Both the Parliament and Council were advocating for the same thresholds. According to some sources, this change will reduce the number of in-scope companies by approximately 70%.
- Non-EU companies with turnover in the EU above €1.5 billion will be subject.
- Due diligence will be risk-based (the Parliament’s negotiating position), with the focus on the areas of subject companies' chains of activities where actual and potential adverse impacts are most likely to occur (the focus on the tier-1 and the previously proposed concept of “plausible information” have been eliminated). When a company has identified adverse impacts equally likely or equally severe in several areas, it can prioritize assessing adverse impacts that involve direct business partners. Companies will not be required to carry out a comprehensive mapping exercise; they can instead conduct a more general scoping exercise. Companies are to base their efforts on reasonably available information and should refrain from requiring unnecessary information from companies not subject to the CSDDD. The Omnibus does not change the human rights and environmental impacts addressed by the CSDDD.
- A climate transition plan will no longer be required. This change is consistent with the Parliament’s position.
- There will not be an EU harmonized liability regime. Liability for non-compliance will be determined at the national level. A review clause on the need for an EU harmonized liability regime will be added. Fines can be up to 3% of net worldwide turnover. Guidance will be provided by the Commission and EU member states. This change is a compromise between the Parliament and Council positions.
- There will be a review clause concerning a possible extension of the scope of the CSDDD.
Next Steps
The Parliament’s Legal Affairs Committee will vote on December 11. The full Parliament will vote during its December plenary session to be held on December 15 and 16.
The Council also needs to endorse and adopt the changes. The Council vote is expected to occur on December 10. The Council is expected to formally adopt the Omnibus changes either the middle of this month or in early January.
Further Details
The Parliament’s press release is here.
The Council’s press release is here.
For our friends and clients in Europe and Asia (and early risers in North America), there will be a press conference at 10:30 Brussels time today, by MEP Jörgen Warborn and Danish Industry Minister Morten Bødskov. See here for details. The replay also will be available.
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