EU Council agrees Omnibus position that further lifts application threshold for CSRD and CSDDD

The European Council yesterday agreed on its negotiating position regarding the Omnibus package, and seeks to lift the application threshold for both CSRD and CSDDD.

The Council’s position, which was adopted by Member States yesterday, will be the basis of its negotiations with the European Parliament to finalise the Omnibus proposal – which aims to reduce the sustainability reporting burden for EU companies.

According to Taylor Wessing Partner Martin Rothermel, quoting data from the SOMO CSDDD Data Hub, CSRD would apply to 3363 companies and CSDDD to 997 companies within the EU if the Council’s position were adopted.

On the Corporate Sustainability Reporting Directive (CSRD), the Council agrees with the Commission’s proposal to lift the application threshold to companies of at least 1,000 employees and €450 million in net turnover, and remove listed SMEs from the law’s scope. However, the Council’s position introduces a review clause to allow for a possible extension of the scope “to ensure adequate availability of corporate sustainability information”.

Amendments to CSDDD proposal

On the Corporate Sustainability Due Diligence Directive (CSDDD), the Council is pushing for a number of amendments to further reduce the – already watered down – regulation. 

First, it wishes to increase the application threshold to companies with 5,000 employees and €1.5 billion in net turnover. As a reminder, the Commission’s proposal places this threshold at 1,000 employees, and the European Parliament’s lead negotiator is asking to lift it to 3,000.

“In the Council’s view, such largest companies can have the biggest influence on their value chain and are best equipped to absorb the costs and burdens of due diligence processes,” explains the Council.

When it comes to identifying potential environmental and human rights risks in supply chains, the Commission has proposed limiting this duty to tier 1 suppliers, but the Council is seeking to change this. Instead of a ‘comprehensive mapping exercise’ on their direct partners, companies should only be required to conduct ‘a more general scoping exercise’ based on identified risk areas. This would still be limited to tier 1 suppliers, but could be extended to other layers of the supply chain in case of “objective and verifiable information suggesting adverse impacts beyond direct business partners”, the Council adds.

Transition plans: adoption vs implementation

The original CSDDD mandated companies to adopt and implement a climate transition plan, and the Omnibus proposal maintains this obligation, though in more flexible language and with a looser definition of what a transition plan is.

Now, the European Council is proposing to make only the adoption of a transition plan mandatory for companies, removing the obligation to implement it. It also gives national supervisory authorities the power to “advise companies on design and implementation of those plans”, and seeks to delay the amended transition plan mandate by two years.

Finally, the Council agrees with the Commission’s proposal to remove civil liability for companies in the case that environmental or human rights violations are found within their supply chains (suggesting they did not conduct sufficient due diligence). This particular amendment has been slammed by activists for making CSDDD “toothless”.