Publication of Directive (EU) 2026/470 simplifying the corporate sustainability reporting (CSRD) and due diligence (CSDDD) rules

On February 26, 2026, Directive (EU) 2026/470 of 24 February 2026 was published in the Official Journal of the European Union. This Directive amends Directives 2006/43/EC (Directive on statutory audits of annual accounts and consolidated accounts), 2013/34/EU (Directive on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings), (EU) 2022/2464 (Corporate Sustainability Reporting Directive or CSRD), and (EU) 2024/1760 (Corporate Sustainability Due Diligence Directive or CS3D) with regard to certain corporate sustainability reporting requirements and corporate sustainability due diligence requirements.

This Directive is part of the simplification legislative package known as Omnibus I (which we reported on here and here), the aim of which was to reduce complexity and unnecessary obstacles, minimise bureaucracy, increase efficiency, and enhance flexibility for the companies falling within its scope.

Corporate Sustainability Reporting Directive

The main amendments to the Corporate Sustainability Reporting Directive (CSRD) are:

• New scope of application: the obligation to report sustainability information is limited to companies with net turnovers exceeding 450 million euros and more than 1,000 employees.
• Protection of value chain companies: companies that do not exceed 1,000 employees will have the right to refuse to provide information beyond that specified in the voluntary standards.
• Voluntary reporting standards: the Commission will adopt voluntary standards not later than July 19, 2026, based on Recommendation (EU) 2025/1710.
• Third-country companies: the thresholds for sustainability reporting by third-country companies are raised to 450 million euros in net turnover in the European Union and to 200 million euros for their subsidiaries or branches in the EU.
• Assurance obligation: the possibility of requiring reasonable assurance in the future is removed, and only limited assurance of sustainability reporting has been retained.
• Application timeline: for fiscal years beginning on or after January 1, 2027, only companies meeting the new thresholds (more than 450 million euros in turnover and more than 1,000 employees) will be required to report.
• Transitional exemption: Member States may exempt companies that do not meet these thresholds from reporting obligations for fiscal years beginning between January 1, 2025 and 31 December 31, 2026.

The Directive enters into force twenty days after its publication, and Member States must transpose it within a year from the date of its entry into force (i.e., before March 19, 2027).

Corporate Sustainability Due Diligence Directive

The most notable amendments to the Corporate Sustainability Due Diligence Directive (CS3D):

• Increase in thresholds to determine the scope of application. The Directive significantly raises the thresholds for determining which companies fall within its scope, specifically:
  • For companies incorporated under the law of the European Union, those with an average of more than 5,000 employees (the CS3D originally set the threshold at 1,000 employees) and a net worldwide turnover exceeding 1,500 million euros (previously 450 million) in the latest fiscal year will be included.
  • Companies incorporated under the law of a third country will fall within the scope of application if they had a net turnover exceeding 1,500 million euros in the Union (previously 450 million) in the fiscal year preceding the last financial year.
  • In the case of companies or parent companies of a group that have entered into franchise or licensing agreements, the royalties referred to in the CS3D must amount to more than 75 million euros (previously 22.5 million) and the net worldwide turnover must exceed 275 million euros (previously 80 million).
• Harmonization and limits on national regulation. Emphasis is placed on the requirement for harmonization of European Union law, preventing Member States from introducing provisions in their national law that establish due diligence obligations differing from those set out in the CS3D in relation to the duties of identifying, prioritizing, preventing, and eliminating adverse impacts, as well as the duties of implementing notification and complaints mfechanisms, monitoring, and communicating the process implemented.
• Simplification of the due diligence process. Certain aspects of the due diligence process are simplified, allowing in-scope companies to first carry out a mapping exercise solely on the basis of reasonably available information, in order to determine the general areas in which adverse impacts are most likely to occur and to be most severe. It is specified that digital solutions and sectoral and multi-stakeholder initiatives also constitute appropriate resources for identifying and assessing adverse impacts. On the basis of the results of the mapping exercise, companies must carry out an in-depth assessment in the areas where a higher likelihood of adverse impacts occurring and being more severe has been identified. Companies may only request information from business partners where such information is necessary. In the case of business partners with fewer than 5,000 employees, they may only request information where it cannot reasonably be obtained by other means.
• Stakeholder engagement. The scope of the obligation to engage with stakeholders is reduced, both in terms of the definition of stakeholder (including only workers, trade unions and workers' representatives, and persons or communities whose rights or interests are, or may be, directly affected), and in terms of the phases in which stakeholder consultations must take place, which is confined to the phase of gathering information on adverse impacts, the development of preventive and corrective action plans, and during the adoption of remediation measures.
• Monitoring. The deadlines for conducting periodic assessments of due diligence operations and measures are made more flexible, by requiring them to be carried out at least every five years (previously every year), when a significant change takes place, and when there are well-founded reasons to believe that the measures adopted are not adequate or effective or that new risks have arisen.
• Transition plan for climate change mitigation. The obligation for companies to adopt and implement a transition plan for climate change mitigation is removed.
• Amendment of the civil liability regime. One of the most significant aspects of the Directive is the removal of the specific civil liability regime at the European Union level that was contained in article 29 of the CS3D, although the right of injured parties to full (but not excessive) compensation is maintained where a company is held liable, under national law, for damages caused by a breach of due diligence requirements.
• Sanctions regime. A uniform maximum cap of 3% of the company's net worldwide turnover is established (previously a minimum threshold of 5% ) for the setting of pecuniary sanctions to be imposed for non-compliance with the provisions of national law transposing the Directive.
• Postponement of application deadlines. The main deadlines established by the CS3D are postponed and unified, specifically:
  • Transposition deadline: Member States must transpose the amendments to the CS3D before July 26, 2028.
  • Unified application date: the application date is unified for all companies falling within the scope of application. It will be July 26, 2029, and the phased application established in the original version of the CS3D has been eliminated.
  • Commission guidelines: the Commission must adopt general guidelines on due diligence not later than July 26, 2027.