New directives, sustainability requirements, and what’s changed since 2025
The sustainability reporting landscape has shifted considerably over the past year. Businesses that were preparing for obligations outlined in 2025 will need to take stock of some significant revisions.
The EU’s Omnibus I Directive — A Major Shake-Up in Sustainability
The European Commission’s original Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CS3D) set ambitious sustainability reporting requirements for companies operating in or with the EU. However, following pressure to boost competitiveness and reduce red tape, the EU has substantially revised both.
The Omnibus I Directive was published in the Official Journal of the EU on 26 February 2026 and entered into force on 18 March 2026. This represents one of the most significant regulatory resets in EU sustainability law to date.
Who is now in scope?
The thresholds for which companies must comply have been raised dramatically. Under the revised CSRD, only companies with more than 1,000 employees and above €450 million net annual turnover are now in scope. This is a substantial increase from the previous thresholds. It has been estimated that these new thresholds may result in more than 80% of companies previously within scope of the CSRD and CS3D now falling outside of them.
For CS3D, the changes are even more pronounced. The CS3D’s scope has been narrowed to companies with more than 5,000 employees and above €1.5 billion net turnover.
Reporting timelines have also shifted
The amendments to CSRD will apply to financial years starting from 1 January 2027. The first reports will be due in 2028. For CS3D, EU Member States will need to adopt national transposition legislation by 26 July 2028, applying to companies from 26 July 2029.
What does this mean for UK businesses?
Despite the rollback, UK firms with EU exposure cannot afford to be complacent. UK companies may still fall within scope if they have securities listed on an EU market, conduct significant business in the EU, or were previously covered by the Non-Financial Reporting Directive.
The changes reflect the global upheaval of the last year, which has led to a shift in focus toward maintaining competitiveness with other jurisdictions that are also rolling back regulatory requirements. Even so, the underlying obligations haven’t disappeared – they’ve been restructured.
The introduction of protections for companies not within scope of the CSRD or CS3D, but within the value chain of reporting entities, is likely to significantly reduce the impact of these pieces of legislation on smaller companies. However, it may increase the information-gathering burden on reporting entities. In practical terms, UK SMEs supplying larger EU-facing businesses may find themselves asked to provide sustainability data voluntarily, even if not legally required.
The bottom line
The direction of travel toward sustainability accountability remains intact – the EU has simplified the route, not abandoned the destination. As a business you should continue to monitor developments and review whether the revised thresholds affect your obligations. Consider too how your position in supply chains may still expose you to indirect requirements.
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