This week’s EU Omnibus developments

Co-legislators reached a provisional agreement on the first omnibus this week.

There are few, if any, surprises in the text that was adopted by European Parliament and Council.

EU firms with more than 1,000 employees and €450m in net turnover – including from subsidiaries – would be required to report under the Corporate Sustainability Reporting Directive (CSRD).

To account for the fact that, under the new thresholds, some ‘Wave One’ companies will fall out of scope when they’re enforced from 2027, the agreement says Member States can exempt them from reporting for the 2025 and 2026 financial years too.

For ‘Wave 4’ companies (non-EU headquartered groups reporting from FY 2028) there would be no employee threshold, but at least one EU subsidiary must generate net turnover of €200m and the non-EU group itself must generate €450m from within the EU in order to be eligible.

Firms don’t have to report information that would harm them commercially, including things relating to intellectual property, expertise, classified information or information that may help safeguard people.

As expected, companies won’t have to report about their smaller business partners if that information isn’t readily available or covered by the new voluntary VSME standard (which will be published before the new agreement comes into force).

Small companies have therefore been granted statutory relief from contractual obligations that their clients or customers might impose to help them gain such information.

This week’s agreement pares back the Corporate Sustainability Due Diligence Directive (CS3D) significantly, as anticipated.

On top of the one-year delay introduced in April through a ‘stop-the-clock’ directive, the new proposal will apply another year-along delay. It means the law won’t have to be transposed until July 2028, and won’t have to be implemented until July 2029.

The thresholds have been lifted from 1,000 employees to 5,000, and €450m net turnover to €1.5bn.

For franchising and licensing models, the thresholds have been lifted from €275m in turnover (from €80m) and €75m in royalties (from €22.5m).

Parliament and Council have overridden the European Commission’s proposal to limit the risk analysis to tier one suppliers, maintaining the requirement for companies to take a more conventional risk-based approach to their whole supply chain. In other words, firms must conduct a scoping exercise to identify risk hot spots based on “reasonably available information”, and then focus on those hot spots.

Climate transition plans are out of the text completely, as is the EU-wide civil liability regime – the law will rely instead on existing or new national frameworks.

The maximum fine that Member States can impose on companies that contravene CS3D will be 3% of global turnover, as opposed to the current “not less than 5%” requirement.

The text also removes a requirement for Member States to prioritise CS3D over foreign laws when cases are brought against CS3D-eligible companies over alleged harms caused outsider the EU.

And companies will no longer have to terminate their relationships with non-compliant suppliers – they’ll instead have a “duty to suspend” them.

A final parliamentary vote on the text is scheduled for Tuesday. It’s usually just a procedural step, although given the number of last-minute surprises that MEPs have introduced into recent discussions on sustainable finance regulation, anything is possible.

The text will then be translated and published in the EU’s Official Journal over coming months.