On 13 October 2025, the European Parliament's (the "Parliament") Legal Affairs Committee ("JURI") voted to pass a compromise proposal ("JURI's compromise text") on the Omnibus I package - part of the European Commission's initiative to streamline certain EU (sustainability) laws including the Corporate Sustainability Reporting Directive ("CSRD"), the Corporate Sustainability Due Diligence Directive ("CS3D"), and the EU Taxonomy Regulation.

JURI's compromise text follows the Council of the EU's (the "Council") negotiating position (adopted in June 2025) and sets up the EU institutions to seek alignment on their respective proposals over the next few months in the so-called "Trilogue" process.

We have previously covered developments relating to the EU Omnibus I Package, including the EU Commission's proposal for the Omnibus I package, and the Council of the EU's negotiating position on the Commission's proposal.

Background

In June 2025, the Council proposed amendments to the CSRD and CS3D that went beyond some of the Commission's proposed regulatory cuts. Following months of debate, the Parliament's main centre-right to centre-left political groups – EPP, Renew Europe and S&D – reached consensus in the JURI around a text that broadly mirrors the Council's negotiating position. This consensus avoided deeper rollbacks through a right-wing coalition, which seemed increasingly likely until the end of last week.

Key elements of JURI's compromise text

We explore some of the key elements of JURI's compromise text below, focusing on differences with the Council's negotiating position.

1. Sustainability due diligence (CS3D)

Scope of application:

The employee threshold requirements do not apply to non-EU companies, that are within the scope of the CS3D if they meet the EU-based net turnover threshold (i.e. not on a global level). The Council's position and the position under JURI's compromise text may represent a 70% reduction in the number of companies within scope of the CS3D.

Timing: There is no change to the transposition deadline for Member States, which has already been postponed by one year to 26 July 2027 in April 2025. The first phase of application of the due diligence obligations (i.e. for large companies) will begin on 26 July 2028. The first guidelines on how to fulfil the due diligence obligations shall be published by the EU Commission in July 2026.

Due diligence obligations: None of the Commission, Council or JURI drafts seek to amend the overarching obligation created by the CS3D, namely that Member States shall ensure that companies conduct risk-based human rights and environmental due diligence. This requires companies to (among other things) take "appropriate measures" to identify and assess actual and potential adverse impacts arising from their own operations, subsidiaries and business partners (where related to their chain of activities), and thereafter to prevent/mitigate potential impacts and bring actual impacts to an end.

With some important variances, each of the drafts proposes a narrower scope of companies' due diligence from the current text of the CS3D at the initial stage of identifying impacts. In particular, the JURI compromise text proposes that companies first conduct a "scoping" (rather than "mapping", as with the current wording) exercise based on information that "is already reasonably available" (without requesting information from business partners), to identify whether adverse impacts have or might occur.

After scoping, the company is only required to assess the most likely and severe adverse impacts, giving priority to the assessment of impacts associated with direct partners. Requesting information from business partners should only occur where necessary, and only as a last resort for partners with fewer than 5,000 employees. In all cases requests should be "targeted, reasonable and proportionate". Moreover, if, after this identification process, companies do not have all the necessary information to prevent, mitigate or stop an adverse impact, they will not be penalised under the proposed text.

In a new obligation not proposed by either of the Commission or the Council, the JURI compromise text clarifies that in an M&A context, an acquiring company has two years to integrate the processes of the target company into its own due diligence policy.

Climate transition plan: The approach under JURI's compromise text restores stronger Paris "compatibility" language and mandatory content requirements dropped by the Council, while aligning with the Council on the lower "reasonable efforts" standard.

It is noteworthy that the ICJ Advisory Opinion on Climate Change (July 2025) (which we explore here) found that while the Paris Agreement targets "well below 2°C," the 1.5°C goal has become the scientific consensus. What constitutes a transition plan "compatible with" the Paris Agreement may therefore continue to be a source of debate, and potential confusion, particularly since the CSRD will continue to reference the 1.5°C target in its transition plan reporting requirements.

Alignment on removal of financial undertakings review: All three institutions agree to remove the requirement for the Commission to assess whether additional due diligence rules are needed for regulated financial undertakings.

Financial penalties reduced: Like the Council's negotiating position, the maximum limit of pecuniary penalties is set at 5% of the net worldwide turnover of the company, or 5% of the net consolidated worldwide turnover calculated at the level of the ultimate parent company, for the preceding financial year. This turns the current floor for penalising the most egregious infringements under the current CS3D into a ceiling.

EU-wide civil liability removed, JURI inserts review mechanism: The EU-wide civil liability regime is now removed across the EU institutions' proposals. However, under JURI's compromise text, the question of whether further rules on civil liability need to be provided for will be revisited by 26 July 2030 and every three years thereafter, where the Commission is required to submit a report to the European Parliament and to the Council on the implementation of the CS3D and its effectiveness in reaching its objectives, in particular in addressing adverse impacts.

2. Sustainability reporting (CSRD)

Scope of application reduced:

The Commission's proposal was estimated to reduce the scope of the sustainability reporting requirements of the CSRD by 80%, while the Council and Parliament negotiating positions may represent a 90% reduction. Further information on the currently applicable regime can be found in our briefing on the CSRD.

Timing: As already pointed out above, due to the new scoping criteria adopted by JURI, many companies that are currently required to publish a sustainability report for financial years starting on or after 1 January 2024 (i.e. large public interest entities with more than 500 employees; "Wave 1 Companies"), will fall out of scope. However, the text adopted by JURI, just like the Commission proposal, does not include transitional provisions for Wave 1 Companies that are currently required to prepare a report under existing law, but will no longer be required to report once the changes are officially adopted and enter into force.

For many companies in countries that have already transposed the CSRD into national law, this means they would need to continue publishing sustainability reports for now – even though it is foreseeable that they will not be required to do so in the future. This becomes particularly relevant for financial years starting on or after 1 January 2025, i.e. reports due in 2026, as these companies would likely have to publish the 2025 report under national law before the new provisions are transposed into national legislation.

Of the three institutions, only the Council addresses this issue and allows Member States to exempt companies affected by this uncertainty from the sustainability reporting obligations for financial years starting on or after 1 January 2025.

Reporting requirements for "wave 3" companies, i.e. publicly listed small and medium-sized companies, which are currently required to publish their first sustainability report for financial years starting on or after 1 January 2026 have been removed in line with the Commission's and Council's texts.

Reporting obligations: Across all EU institutions, a new EFRAG voluntary reporting standard (more information here) limits what in-scope companies can request from smaller out-of-scope partners, reducing the indirect reporting burden. A "value-chain cap" provides that in-scope companies cannot request information from out-of-scope companies that goes beyond the information set out in the standard.

Further, JURI's compromise text provides that the Commission will adopt a delegated act as soon as possible, and at the latest six months after the entry into force of the Omnibus I package, to revise the ESRS to substantially reform the standards. We note that following a public consultation process that ended on 29 September 2025, EFRAG is set to publish the final simplified ESRS by the end of November, ahead of a conference on 4 December.

Lastly, the JURI text also provides that, in the future, in-scope "public interest entities" – including publicly listed entities – may make use of the exemption from publishing a sustainability report on entity level, if they are included in the consolidated sustainability report of their parent company.

(3) Taxonomy Regulation

Like the Council's position, the JURI text does not pick up the Commission's proposal to make reporting under the EU Taxonomy Regulation voluntary for certain companies.

Next steps

With the JURI's compromise text confirmed, the committee also voted in favour of a "mandate to negotiate". This mandate will be announced at the plenary of the European Parliament, on Monday 20 October under Rule 72(2) of the European Parliament Rules of Procedure. A "medium threshold" of MEPs (one-tenth, or 72) may, by the end of Tuesday 21 October, request that the mandate be put to a plenary vote, which would be held by the end of the plenary session (by Thursday 23 October). Following either tacit approval or a confirmation at a plenary vote, the three institutions (unless JURI's mandate is rejected at plenary) will enter into Trilogue negotiations to reach a provisional agreement on a legislative proposal acceptable to both Parliament and Council. Given the relative level of alignment between all parties, this process may be finalised by the end of Q4 2025, or the start of Q1 2026.

Outlook

The fraught negotiations over the Omnibus I have demonstrated the strong views held by the different stakeholders, and underscores the difficulty associated with striking the appropriate balance between competitiveness, legislative certainty, and climate impact. Whether any further speedbumps arise over the course of the Trilogue negotiations remains to be seen, but for now, the governing coalition within European Parliament appears to have passed a major test of its ability to navigate a wide-ranging simplification process.