Corporate Sustainability Reporting Directive (CSRD): What the Omnibus Changes Mean for Your Organisation

Mar 13

Written By Bo Y

The CSRD has been fundamentally reshaped. The Omnibus I Directive (EU) 2026/470, published on 26 February 2026, raises scope thresholds to 1,000 employees and €450 million turnover, eliminates sector-specific ESRS, introduces a value-chain data cap, and keeps assurance at the limited level. This guide explains what the CSRD now requires, who remains in scope, what has changed, and what organisations should do next.

What Is the CSRD

The Corporate Sustainability Reporting Directive (CSRD) is the EU's framework for mandatory sustainability reporting. It replaced the Non-Financial Reporting Directive (NFRD) and requires companies to report detailed environmental, social, and governance information using the European Sustainability Reporting Standards (ESRS), with independent assurance and digital tagging.

The CSRD was adopted in 2022 and began applying in stages from January 2024. It was designed to bring sustainability reporting to the same level of discipline and fidelity as financial reporting — embedding it in the management report, requiring assurance, and mandating a double materiality assessment that considers both the organisation's impact on sustainability matters and the financial risks and opportunities those matters create.

However, the CSRD as originally designed no longer exists. On 26 February 2026, the Omnibus I Directive — officially Directive (EU) 2026/470 — was published in the Official Journal of the European Union, fundamentally reshaping the scope, timeline, reporting standards, and several key obligations of the CSRD. The directive enters into force on 18 March 2026 and must be transposed by Member States by 19 March 2027.

This is a March 2026 guide — the landscape has just changed

The Omnibus I Directive was published two weeks before this article. The simplified ESRS delegated act is expected by mid-2026. National transposition is ongoing. Companies should treat this guide as a current-state overview while monitoring EUR-Lex and national implementations closely. The core architecture of the CSRD remains intact, but who it applies to, what they must report, and when they must start has changed substantially.

The Omnibus Overhaul: What Changed

The Omnibus I Directive is the result of the European Commission's February 2025 simplification proposal, a provisional agreement reached in December 2025, European Parliament adoption on 16 December 2025, and final Council adoption on 24 February 2026. It was driven by competitiveness concerns articulated in the Draghi and Letta reports, and responds to industry feedback that the original CSRD scope and ESRS complexity were disproportionate for many companies.

The changes are structural, not cosmetic. The following table summarises the key shifts.

Before Omnibus (Original CSRD)

Scope: ~49,000 EU companies
Thresholds: 250+ employees, €40M turnover, €20M assets (2 of 3)
Listed SMEs in scope (Wave 3)
Full ESRS Set 1: ~1,000 data points
Sector-specific ESRS planned
Limited assurance transitioning to reasonable assurance
Phased implementation: Waves 1–4 (FY 2024–2028)

After Omnibus (Directive 2026/470)

Scope: significantly narrowed
Thresholds: 1,000+ employees and €450M turnover
Listed SMEs removed from scope
Simplified ESRS: ~61% fewer mandatory data points
Sector-specific ESRS eliminated
Limited assurance retained permanently (no escalation)
New timeline: Wave 2 reports in 2028 for FY 2027

The wave system has been replaced. The original phased approach (Waves 1–4) is effectively superseded by new unified thresholds that take full effect for financial years starting on or after 1 January 2027. The "Stop-the-Clock" Directive (adopted April 2025) had already postponed Wave 2 and Wave 3 deadlines by two years. The Omnibus I Directive now removes listed SMEs (Wave 3) from scope entirely and raises the thresholds so that many Wave 2 companies also fall outside the revised scope.

Who Is Now In Scope

From financial years starting on or after 1 January 2027, the CSRD applies to EU companies that meet both of the following criteria: a minimum average of 1,000 employees during the financial year, and annual net turnover of more than €450 million. These thresholds are assessed on a standalone or consolidated group basis.

EU large companies (permanent scope)

Public and non-public companies meeting both the 1,000-employee and €450M turnover thresholds. First report in 2028 for FY 2027 (if not already reporting). This is the permanent scope from FY 2027 onwards.

Wave 1 companies (transitional)

Large public-interest entities already reporting for FY 2024. If they fall below the new thresholds, Member States may exempt them from reporting for FY 2025 and FY 2026. They remain subject to existing requirements until any exemption is transposed into national law.

Third-country undertakings

Non-EU parent companies with EU subsidiaries/branches must report from FY 2028 if: the parent generates >€450M net turnover in the EU, and has at least one large EU subsidiary or a branch generating >€200M turnover.

Removed from scope

Listed SMEs (previously Wave 3) are no longer required to report. Financial holding undertakings are also exempt. Companies below the new thresholds may use the Voluntary Sustainability Standard (VSME) if they choose to report.

Watch national transposition closely

Member States must transpose the Omnibus I Directive's CSRD provisions by 19 March 2027. The directive permits — but does not require — Member States to exempt Wave 1 companies that fall below the new thresholds for FY 2025 and FY 2026. Whether your organisation benefits from this exemption depends entirely on how your Member State chooses to implement it. Until transposition occurs, Wave 1 entities remain subject to existing requirements.

A review clause is included. The Omnibus I Directive contains a provision for the European Commission to reassess the scope thresholds in the future. This means scope expansion cannot be ruled out. Companies that fall just below the new thresholds — or that operate in sectors with high sustainability exposure — should consider the strategic value of continuing to report voluntarily.

Revised Reporting Timeline

The original four-wave implementation has been replaced by a simplified structure. The Stop-the-Clock Directive (April 2025) and the Omnibus I Directive together produce the following timeline.

FY 2024 (reported in 2025)

Wave 1: Large public-interest entities already subject to NFRD. These companies have filed or are filing their first CSRD reports under full ESRS Set 1 (with "quick fix" transitional reliefs).

~1,600 largest EU companies

FY 2025–2026 (transition period)

Wave 1 companies that fall below new thresholds: Member States may grant exemptions for FY 2025 and FY 2026. Wave 1 companies that remain above thresholds: continue reporting under existing ESRS (with "quick fix" reliefs extended through FY 2026). Wave 2 and Wave 3: postponed by Stop-the-Clock Directive.

Subject to national transposition

FY 2027 (reported in 2028)

New permanent scope takes effect. All companies meeting the 1,000-employee and €450M turnover thresholds report under the simplified ESRS. This is the first year where the full Omnibus-revised framework applies.

Companies meeting both new thresholds

FY 2028 (reported in 2029)

Third-country undertakings with sufficient EU presence must report. Thresholds: parent >€450M turnover in EU, plus at least one large EU subsidiary or branch >€200M turnover.

Non-EU companies with significant EU operations

Simplified ESRS adoption expected mid-2026

The European Commission is reviewing EFRAG's technical advice (delivered December 2025) and is expected to adopt the simplified ESRS via delegated act by September 2026 at the latest — six months after the Omnibus I Directive enters into force. The simplified ESRS are intended to apply from FY 2027. A four-week call for feedback on the delegated act is expected in Q2 2026.

The Simplified ESRS: What Changes in Practice

EFRAG delivered its technical advice on the simplified ESRS to the European Commission on 3 December 2025. The simplified standards represent a substantial structural streamlining of the original ESRS Set 1, while preserving the core architecture of the CSRD reporting framework.

Key changes at a glance

61% reduction in mandatory data points (if material), with all voluntary data points removed entirely
Double materiality remains mandatory — but the assessment process is simplified with a new "top-down" option and reduced documentation requirements
Fair presentation framework introduced as an overarching filter: companies must ensure their sustainability reporting fairly presents material information, rather than mechanically completing every disclosure requirement
Sector-specific ESRS eliminated — the development of sector standards has been discontinued
Limited assurance retained permanently — the planned escalation to reasonable assurance has been removed
Enhanced interoperability with IFRS S1/S2, supporting multi-framework reporting for companies subject to both European and international requirements
Narrative flexibility increased — policies, actions, and targets can be described in a more principles-based manner rather than prescriptive formats
Value chain data pressure reduced — the preference for direct value chain data has been relaxed, allowing greater use of estimates, sector averages, and proxies where primary data is not available without undue cost or effort

The simplified ESRS retain the 12-standard structure (ESRS 1, ESRS 2, plus 10 topical standards across environmental, social, and governance domains). What changes is depth, not architecture. The standards are shorter, clearer, and more focused on material information. ESRS 2 (General Disclosures) is now fully subject to the materiality filter, whereas previously certain disclosures were mandatory regardless of materiality.

Futureproof perspective: The simplified ESRS do not change what companies are accountable for. They change the volume and granularity of what must be disclosed. Companies that mistake simplification for deregulation will find themselves unprepared when the delegated act is published and the FY 2027 reporting clock starts. The most effective response is to use the extended timeline to build leaner, more integrated reporting systems — not to pause preparation.

Core Reporting Requirements That Remain

Double materiality assessment

The double materiality assessment remains the methodological backbone of CSRD reporting. Companies must assess both impact materiality (effects on environment and society) and financial materiality (risks and opportunities affecting enterprise value). The simplified ESRS clarify that the assessment functions as a filter: only material information must be reported. A new "top-down" approach is permitted, allowing companies to begin at the topic level rather than identifying individual impacts, risks, and opportunities from the bottom up. The DMA need not be repeated annually unless significant changes arise.

Management report integration

Sustainability information must be published within the management report — alongside financial statements. This structural requirement is unchanged. The sustainability statement is not a standalone document; it is part of the corporate reporting package and subject to the same governance, internal controls, and board oversight.

Assurance

Third-party assurance remains mandatory but will stay at the limited assurance level. The original plan to escalate to reasonable assurance has been removed by the Omnibus I Directive. This is a significant practical change: limited assurance requires less evidence-gathering than reasonable assurance, reducing cost and complexity for both companies and auditors.

Digital tagging (XBRL)

Sustainability reports must be digitally tagged using the European Single Electronic Format (ESEF), making data machine-readable and comparable. This requirement remains in place and is essential for regulatory supervision and investor analysis.

EU Taxonomy alignment

Companies in scope of the CSRD must report on the proportion of their activities that are Taxonomy-aligned. The Omnibus I Directive introduces simplified templates and allows companies to apply a materiality threshold. Companies may continue using original templates for FY 2025–2026 reporting while transitioning to the new requirements.

The Value Chain Cap: Protection for Smaller Companies

One of the most consequential practical changes is the introduction of a value chain data cap. Companies within the revised CSRD scope are now limited in what they can request from smaller companies in their value chain.

Specifically, entities with 1,000 employees or fewer that are not themselves in scope of the CSRD are designated as "protected undertakings." These protected undertakings have the legal right to refuse information requests that go beyond what is specified in the forthcoming Voluntary Sustainability Standard for SMEs (VSME). The European Commission is expected to publish the VSME standard via delegated act by July 2026.

For reporting companies, this means redesigning data collection strategies. The previous expectation — that CSRD-reporting companies would push detailed disclosure requirements down through their supply chains — has been explicitly curtailed. Companies should now adopt risk-based approaches to value chain data, using estimates, sector averages, and spend-based proxies where primary data cannot be obtained from protected undertakings.

Connections to Other EU Regulations

CSDDD (Corporate Sustainability Due Diligence Directive): The Omnibus I Directive also substantially restructured the CSDDD. Scope thresholds are raised to 5,000 employees and €1.5 billion turnover. The requirement to adopt climate transition plans has been removed. The transposition deadline is extended to July 2028, with application from July 2029. Companies in scope of both CSRD and CSDDD should map the interdependencies to avoid duplicating due diligence and reporting efforts.

EU Taxonomy: Reporting companies must disclose Taxonomy-eligible and Taxonomy-aligned activities. The Omnibus package includes simplification of the Taxonomy delegated acts, with revised technical screening criteria expected in Q2 2026.

ISSB (IFRS S1/S2): The simplified ESRS are designed for enhanced interoperability with the ISSB's sustainability disclosure standards. Companies subject to both frameworks should find closer alignment, though differences remain in areas such as GHG boundary definitions and financial effect disclosures.

EU Batteries Regulation, EUDR, ESPR: Product-level sustainability regulations increasingly feed into or interact with CSRD reporting. Data collected for battery passports, deforestation due diligence, or ecodesign compliance can serve CSRD reporting requirements and vice versa.

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How to Prepare: A Post-Omnibus Action Plan

The extended timelines and simplified standards should not be mistaken for permission to stop preparing. Sustainability data remains capital-market relevant. Banks, investors, insurers, and rating agencies continue integrating ESG metrics into risk modelling and financing decisions. Companies that dismantle preparation efforts now risk higher implementation costs if scope is expanded under the review clause.

Step 1: Reassess scope and thresholds

Determine whether your organisation remains in scope under the revised thresholds (1,000+ employees and €450M+ turnover). If you fall below, consider whether voluntary reporting under the VSME standard serves your strategic interests — for investor relations, supply chain positioning, or pre-empting a possible future scope expansion.

Step 2: Update your double materiality assessment

If you have already conducted a DMA under the original ESRS, review it against the simplified framework. The top-down approach and fair presentation filter may allow you to streamline your assessment. If you have not yet started, use the simplified guidance to scope the exercise efficiently from the outset.

Step 3: Redesign value chain data collection

Segment your suppliers by size and sustainability risk. For suppliers with fewer than 1,000 employees, limit information requests to what will be specified in the VSME standard (expected July 2026). For high-impact suppliers, maintain deeper engagement on a risk-proportionate basis.

Step 4: Prepare for simplified ESRS

Monitor the European Commission's delegated act process (expected Q2–Q3 2026). Once published, identify which data points have been removed from your current reporting scope and adjust data collection, internal controls, and governance processes accordingly. Do not over-invest in data points that are likely to be eliminated.

Step 5: Align governance and assurance readiness

Board oversight, internal controls, and structured ESG data management remain essential for audit-ready disclosures — even under limited assurance. Engage your auditor early to agree on methodology, documentation standards, and assurance scope. The reduced data point count does not reduce the need for rigorous process.

Frequently Asked Questions

Is the CSRD still in force?

Yes. The CSRD remains the EU's mandatory sustainability reporting framework. The Omnibus I Directive amends the CSRD — it does not repeal it. The core architecture (double materiality, management report integration, assurance, digital tagging) remains intact. What has changed is the scope (narrower), the standards (simplified), and the timeline (extended for many companies).

My company was in Wave 2. Am I still in scope?

Only if you meet both of the new thresholds: 1,000+ employees and €450M+ turnover. Many companies that were previously in scope under the original 250-employee / €40M turnover thresholds will now fall outside the revised scope. If you remain in scope, your first reporting year is FY 2027 (report published in 2028).

What about listed SMEs?

Listed SMEs have been removed from CSRD scope entirely by the Omnibus I Directive. They are no longer required to report. They may choose to report voluntarily under the VSME standard once it is published (expected mid-2026).

Is double materiality still required?

Yes. Double materiality remains the mandatory methodological foundation of CSRD reporting. The assessment process has been simplified — with a new top-down approach option and reduced documentation requirements — but the requirement itself is unchanged. Companies must still assess both impact materiality and financial materiality.

Should we stop CSRD preparation if we fall out of scope?

This is a strategic decision, not just a compliance one. The review clause means scope expansion is possible. Investors, lenders, and customers are increasingly requesting sustainability data regardless of legal requirements. Companies that maintain basic reporting readiness — using the VSME standard as a framework — will be better positioned than those that abandon preparation entirely, whether for future regulatory requirements, financing conditions, or supply chain expectations.

When will the simplified ESRS be finalised?

The European Commission received EFRAG's technical advice in December 2025 and is expected to adopt the simplified ESRS via delegated act by September 2026 (within six months of the Omnibus I Directive entering into force). A four-week call for feedback is expected in Q2 2026. The simplified standards are intended to apply from FY 2027.

What can I request from my suppliers now?

Under the new value chain cap, companies with 1,000 employees or fewer that are not themselves in CSRD scope have the legal right to refuse information requests beyond what is specified in the VSME standard. The VSME delegated act is expected by July 2026. Until then, companies should adopt a proportionate, risk-based approach and avoid overloading smaller suppliers with extensive questionnaires.

Conclusion

The Omnibus I Directive is the most significant recalibration of EU sustainability reporting since the CSRD was adopted. It narrows scope, simplifies standards, and extends timelines — but it does not eliminate the directive or its core obligations. Companies that remain in scope face a streamlined but still rigorous reporting regime. Companies that fall out of scope face a strategic choice about whether to maintain reporting readiness or step back.

The next six to twelve months — as Member States transpose the directive, the Commission adopts the simplified ESRS, and the VSME standard is published — will be critical for planning. Companies that use this period to build lean, integrated, audit-ready sustainability reporting systems will be in the strongest position, whether for compliance, investor relations, or competitive positioning.

Disclaimer: This article is intended as a practical orientation guide, not legal advice. It reflects information available as of mid-March 2026, immediately following the publication of Directive (EU) 2026/470 on 26 February 2026. Key elements remain in motion — in particular, national transposition by Member States, the adoption of the simplified ESRS delegated act, and the VSME standard. Readers should verify all compliance-critical obligations against the authoritative legal text on EUR-Lex and seek qualified legal counsel before making compliance decisions. Futureproof Solutions monitors regulatory developments continuously and updates this guidance accordingly.

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Bo Y