Omnibus I – Council published its negotiating mandate preparing for the upcoming trilogue procedure
On 23 June 2025, the Council of the EU adopted its negotiating position on the Commission's proposal to simplify sustainability reporting and due diligence requirements ("Omnibus I").
Following the European Commission's proposal for Omnibus I in February 2025 (for further details, please refer to our blog post on the EU Omnibus-I Package here), the Council published its negotiating mandate preparing for the interinstitutional negotiations with the Parliament, with the Commission acting as mediator (so-called "Trilogue"). The Omnibus I proposal of the Commission aims to streamline the Corporate Sustainability Reporting Directive ("CSRD"), the Corporate Sustainability Due Diligence Directive ("CS3D"), the EU Taxonomy Regulation and the Regulation on the Carbon Border Adjustment Mechanism ("CBAM"). Different from the Commission’s proposal, the Council’s negotiation position does relate to potential changes of the CBAM. The Council and the European Parliament already reached a provisional agreement on the Commission’s proposed changes to the CBAM on 18 June 2025
Key elements of the Council's position
The Council's negotiating position proposes amendments to the CSRD and the CS3D that partly go further than the Commission's proposal.
Sustainability reporting (CSRD)
- Scope of application further limited: The Commission proposed increasing the CSRD's thresholds from 250 to 1,000 employees, while maintaining the remaining thresholds for net turnover and balance sheet total for large companies, i.e. EUR 50 million net turnover and a balance sheet total of EUR 25 million. Alongside the employee threshold, either the net turnover or balance sheet thresholds needed to be met. The Council goes further, requiring a net turnover of EUR 450 million in addition to the 1,000 employee threshold.
Moreover, the Council proposes a review clause to assess whether and how the scope of the CSRD should be extended. - No opt-in provision regarding EU Taxonomy: The Commission's proposal provided for an opt-in regime for taxonomy reporting; large undertakings with more than 1,000 employees on average and a net turnover not exceeding EUR 450 million which claim that their activities are aligned or partially aligned with the EU Taxonomy would disclose their turnover and CapEx KPIs and may choose to disclose their OpEx KPIs. If the Omnibus Proposal is adopted in the form proposed by the Commission, companies opting into taxonomy reporting under the CSRD would not be required to fully report under the Taxonomy Regulation. However, the Council mandate does not pick up this opt-in regime as proposed by the Commission, i.e. does not propose any amendments with regard to Taxonomy reporting. Thus, in our understanding the Council supports the current regime according to which the scope of CSRD-reporting and Taxonomy-reporting is aligned, i.e. companies reporting under the CSRD must also report under the Taxonomy Regulation.
- Application to wave 1 companies: The Council proposes an exemption for wave 1 companies, i.e. large undertakings that are public-interest entities and have more than 500 employees and report for financial years starting on or after 1 January 2024. It proposes that Member States may exempt wave 1 companies that do not meet the new scoping criteria from preparing a CSRD report for the financial year 1 January 2025 to 31 December 2026.
- Reporting obligations: The Council mandate maintains mitigation of the "trickle-down" effect of sustainability reporting legislation on companies which are not in scope, especially SMEs. The Council's proposal also obliges the Commission to adopt sustainability reporting standards for voluntary use ("VSME"). This VSME also serves as a value chain cap, i.e. in-scope companies are not allowed to request information from out-of-scope companies exceeding information set out in the VSME. The Council also reacts to concerns that have been raised in the course of the Omnibus procedure that large companies with dominant position may circumvent this by contractual agreements. Hence, the Council proposes to stipulate a legal prohibition of such agreements, which "shall not be binding".
Sustainability due diligence (CS3D)
- Scope of application amended: While the Commission's proposal does not provide for any changes to the CS3D's scope of application, the Council suggests increasing the thresholds for EU companies to more than 5,000 employees and EUR 1.5 billion global net turnover per year. (For non-EU companies, no employee threshold would apply, and the turnover threshold would be limited to EU turnover). Were this threshold to be adopted, alignment with the CSRD's thresholds, an aim of the Commission's proposal, would not be achieved.
- Timing further postponed: The Council mandate also postpones the transposition deadline by one additional year to 26 July 2028. Consequently, the due diligence obligations would apply as of 26 July 2029 rather than from 26 July 2028 (which would be the case under Omnibus 1 and the adopted 'Stop the Clock' Directive).
- Focus on direct business partners remains: The Council keeps the Commission's proposal to limit the in-depth risk assessment to the operations of direct business partners only, except in limited circumstances. A mapping exercise of the company's chain of activities to identify its indirect business partners is also generally required. However, the company must only use the reasonably available information to identify its indirect business partners. Thus, it would not be required to extensively gather additional information to identify the indirect business partners. A further, in-depth analysis of the identified indirect business partners would then only be required if the company has, or can reasonably be expected to have, objective and verifiable information that suggests that adverse impacts at the level of the operations of an indirect business partner have arisen or have a reasonable prospect of arising. Overall, the Council provides for more details on what is considered "reasonable" information and thus reacts to the criticism concerning the Commission's rather vague concept of "plausible information".
As the Commission, the Council also proposes to introduce a provision that hinders circumventing actions in order to make a direct business partner appear to be an indirect business partner.
Further, the Council explicitly gives companies the ability to implement contractual cascading by seeking contractual assurance via, for example, codes of conduct.
The Council also includes a review clause that requires the Commission to assess, by 26 July 2031, whether these obligations should be extended beyond direct business partners. - Areas of alignment with the Commission's proposal: On numerous other points, such as the removal of an EU-wide civil liability, the simplification of transition planning, and the removal of any review on the exclusion of financial institutions from the scope of CS3D, the Council proposal largely aligns with the Commission's proposals.
- Climate transition plan: Similar to the Commission's proposal, the Council mandate simplifies the CS3D's provisions on transition plans. The plans must be adopted, but no longer have to be put into effect. Instead, the plan needs to include implementing actions. However, the Council's draft significantly amends core elements of the CS3D's climate transition plan obligations.
The Council amends the language of the Commission's proposal to specify that the transition plans need only "contribute to", rather than be "compatible with" the Paris Agreement. The Council also removes any mention of the 1.5°C temperature goal of the Paris Agreement.
The Council also removes the requirement that the climate transition plan be carried out with "best efforts", reducing the standard to "reasonable efforts", defined as "taking the reasonable steps that would be taken by a diligent person to achieve the targets set in the transition plan, taking into account best industry practices, the effectiveness of actions taken, and the principle of proportionality."
Further, the Council proposal removes any mandatory content requirements for the climate transition plan, stating that it "may" rather than "shall" contain elements such as time-bound targets.
The Council draft clarifies that supervisory authorities are only obliged to supervise the adoption (and therefore not the design) of the climate transition plans.
Finally, the Council proposes that the obligation to adopt a climate transition plan should be delayed by up to two years after the due diligence obligations begin to apply, i.e. from 26 July 2031.
Next steps
With its negotiating position, the Council is now fully prepared for Trilogue, which will start once the European Parliament has reached an agreed position. It is expected that the Parliament will adopt its negotiating mandate only after the Parliament's summer break.
The responsible parliamentary Committee on Legal Affairs (JURI) is currently working on its draft report which then needs to be adopted in plenary. On 24 June 2025, the Committee's rapporteur, Swedish MEP Warborn, presented a draft report on the Omnibus-I Package to the JURI committee. Based on currently available information, the JURI vote is scheduled for 13 October 2025, while the vote in plenary is expected by the end of October 2025. After this, the Trilogue proceedings can start.
Outlook
The Omnibus-I Package as presented by the Commission in February 2025 was intended to reduce the regulatory burden of sustainability reporting and due diligence. However, the balance between effective protection of human and environmental rights by all relevant players and, on the other hand, simplifying regulatory frameworks is hard to find.
It further remains to be seen how the Parliament and interinstitutional negotiations within the EU bodies will draw the fine line between a feasible, economical approach that maintains the competitiveness of EU companies without watering down human and environmental rights, sustainability reporting and due diligence.