After months of uncertainty, late-night negotiations in Brussels have reshaped the future of Europe’s sustainability framework. The European Parliament has now reached political agreement on the Omnibus package, setting the stage for a major recalibration of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).
The deal, struck on October 8, offers long-awaited clarity for businesses but it also marks a retreat from the EU’s once-ambitious sustainability agenda.
Political turbulence behind the deal
The outcome came after a tense day in Parliament. The centre-right European People’s Party (EPP) threatened to side with the far right unless the Socialists & Democrats (S&D) group agreed to its terms. Under pressure, the S&D conceded, a move that led Lara Wolters, the S&D lead negotiator on the file, to resign in protest.
This compromise may bring closure, but it’s been described as a capitulation rather than a consensus. It reflects a broader shift in EU politics where sustainability has become a bargaining chip in the push to cut regulatory burdens and boost competitiveness ahead of the 2025 elections.
Still, the deal removes months of uncertainty and for businesses, that matters.
What’s changing? Two key directives recast
The Omnibus package, first proposed by the European Commission in February, aims to “simplify” EU sustainability rules by narrowing their scope and streamlining due diligence obligations. The Parliament’s new position largely aligns with the Council’s earlier stance, meaning a final deal could now move quickly through the trilogue process later this year.
Here’s what’s at stake.
- Corporate Sustainability Reporting Directive (CSRD)
Under the compromise, only companies meeting both of the following criteria will be in scope:
- 1,000 employees or more
- €450 million in annual turnover
That’s a dramatic reduction from the current 250-employee threshold, excluding around 90% of companies previously expected to report under CSRD.
For small and mid-sized enterprises, this means clear relief from complex sustainability reporting obligations. For larger groups, it means greater certainty that these thresholds are now the likely final parameters, as the Commission, Council and Parliament appear aligned.
However, the Commission’s original proposal used a much lower €50 million turnover threshold so the question remains whether €450 million will survive the negotiations.
What’s clear is that most SMEs are now firmly out of scope. Investors and supply chain partners will likely continue to expect disclosures aligned with CSRD standards, meaning voluntary reporting will remain strategically important.
- Corporate Sustainability Due Diligence Directive (CSDDD)
The CSDDD, designed to ensure companies identify and address human rights and environmental harms across their value chains, has seen an even more radical narrowing.
The new Parliament position sets the bar at:
- 5,000 employees
- €1.5 billion in annual turnover
This restricts the law to only the largest multinationals, cutting the number of in-scope companies by an estimated 70%. Due diligence obligations will also become entirely risk-based, allowing companies to focus their efforts where risks are “most likely and most severe.” Member States must ensure that companies rely primarily on information already available, rather than reaching out to business partners for new data.
Climate transition plans, once at risk of being dropped altogether, survive in the text, but companies will only need to make “reasonable efforts” to implement them. There will also be no EU-wide civil liability framework, leaving enforcement to national regimes.
Critics warn that these changes gut the directive’s purpose: Most of Europe’s corporate ecosystem will no longer have legal obligations to conduct human rights or environmental due diligence.
It’s getting closer
The deal will now move quickly through the next stages:
- October 13: Vote in the Parliament’s Legal Affairs Committee (JURI)
- Late October / Early November: Plenary vote in the European Parliament
- November/December: Trilogue negotiations between Parliament, Council and Commission
With the Danish Presidency of the Council pushing for closure by early 2025, the final Omnibus package could be sealed within months. For businesses, that means it’s time to stop waiting and start preparing.
What this means for your company
For SMEs: If your company has fewer than 1,000 employees, you are now clearly out of scope for both CSRD and CSDDD. This will reduce compliance costs but not necessarily stakeholder scrutiny. Large corporate customers, financial institutions and investors will continue to demand sustainability data and due diligence information from their smaller suppliers.
For large companies: Those still in scope should begin planning for streamlined but targeted due diligence processes, using a risk-based approach and preparing to justify decisions about where they focus their attention. The alignment between Parliament and Council makes it very likely that these contours will define the final text.
For non-EU companies: The €450 million EU turnover threshold for non-EU parent companies remains, confirming that third-country entities with significant EU activity will still have to comply with EU sustainability rules.
A step back for sustainability?
The political message is mixed. On one hand, the Omnibus compromise simplifies rules and reduces burdens, especially for smaller firms. On the other, it shrinks the EU’s sustainability reach and may weaken global leadership on ESG regulation.
What’s clear is that the debate is now about credibility as much as competitiveness. The centrist coalition that supports EC president Ursula von der Leyen may have secured a deal, but critics argue it did so at a high cost to both sustainability ambition and political integrity.
But at least, after months of uncertainty, companies across Europe will finally have a clearer sense of what lies ahead.
The EU’s sustainability regime is entering its next phase and it is leaner, risk-based and politically hardened. Whether that’s a step toward smarter regulation or a retreat from responsibility depends on where you sit. But one thing is certain: The final shape of Europe’s ESG rulebook will be decided in the coming months.
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