In a year-end push, European Union institutions have finalized key legislation, delivering crucial legal certainty on EU sustainability rules for businesses. Following the European Commission’s “Omnibus” proposal in February 2025 to simplify and delay major regulations, the Parliament and Council have now approved amendments. This provides companies with a clear, simplified framework for the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Deforestation Regulation (EUDR) as they head into 2026.
Key Finalized Changes to Major Directives
The EU Parliament’s plenary vote on December 16 approved the Omnibus Directive, amending both the CSRD and CSDDD. After expected swift Council approval, the text will enter force 20 days after publication. This marks the definitive adoption of the simplification package.
Concurrently, the European Financial Reporting Advisory Group (EFRAG) released the revised European Sustainability Reporting Standards (ESRS) on December 3, 2025. These standards implement the core simplification goals of the Omnibus. The Commission will now adopt a Delegated Act based on this draft, with a public consultation expected in early 2026.
What the Simplifications Mean for Businesses
The primary goal is to reduce administrative burden. Key changes include:
- Raised thresholds for which companies fall under the mandatory CSRD reporting scope, potentially exempting many SMEs.
- A simplified and streamlined set of ESRS for those still in scope.
- Delayed timelines for the application of certain CSDDD due diligence obligations.
- For companies now outside mandatory scope, a forthcoming voluntary reporting standard based on EFRAG’s VSME will be available to maintain consistency.
Parallel Updates to EU Taxonomy and EUDR
Changes to the EU Taxonomy have progressed separately. A Delegated Act simplifying disclosure requirements was adopted in July 2025 and is expected to apply from January 1, 2026, for the 2025 financial year. On December 17, the Commission issued a guidance document to help businesses prepare for these new, simpler Taxonomy disclosures.
The EU Deforestation Regulation (EUDR) also received targeted simplifications and an application delay. The Parliament approved the revised text on December 17, following a political agreement with member states on December 4. The changes must be formally endorsed by the Council and published before year-end to enter force. The Commission must also present an impact assessment report by April 30, 2026.
Next Steps for Companies
With this new legal certainty on EU sustainability rules, businesses can now plan effectively. Immediate recommended actions include:
- Reassess Scoping: Determine if your EU entities or non-EU parent company still fall under the mandatory CSRD and CSDDD obligations based on the new, higher thresholds.
- Update Compliance Roadmaps: Revise your ESG compliance strategy to reflect the updated timelines and simplified requirements for CSRD, EU Taxonomy, and CSDDD.
- Review Double Materiality Assessment: Consider the impact of the revised ESRS on your ongoing double materiality assessment process.
Official texts and guidance are published in the EU Official Journal.
The EU’s year-end legislative wrap-up provides the clarity on sustainability rules that businesses urgently needed. By simplifying standards and delaying certain obligations, the bloc aims to balance its green ambitions with corporate competitiveness. Companies must now leverage this certainty to build robust, efficient compliance pathways for 2026 and beyond.
