After protracted negotiations and a period of uncertainty for business, critical amendments to the Corporate Sustainability Reporting Directive (“CSRD”) and Corporate Sustainability Due Diligence Directive (“CSDDD”) have been formally agreed and will enter into force on 18 March 2026. This client alert sets out who the amended directives will apply to and when, along with a summary of some of the key substantive changes.
Directive (EU) 2026/470 of 24 February 2026, part of the “Omnibus” simplification package introduced by the European Commission a year ago (see our Alert) has now been formally adopted by the European Parliament and Council and published in the Official Journal of the European Union.
This Directive amends key legislation governing corporate sustainability requirements, including the CSRD and CSDDD.
In line with the Commission’s commitment to reducing reporting burdens and enhancing competitiveness, application thresholds for the CSRD and CSDDD have been significantly raised to apply only to the largest companies.
Key Substantive Changes To The CSRD:
- Directive (EU) 2026/470 strips the Commission of its power to adopt additional, sector-specific European Sustainability Reporting Standards (“ESRS”). This means that only the cross-cutting ESRS, adopted by the Commission in a delegated act in 2023, will serve as the basis for reporting . In addition, the Commission is currently reviewing EFRAG’s technical advice on ways to simplify the delegated act on cross-cutting ESRS.
- It grants the Commission authority to develop sustainability reporting standards for voluntary use. These are designed for companies outside the scope of mandatory reporting that nonetheless choose to report, and for value chain partners asked to supply information to a reporting company.
- It introduces new concepts of “reporting undertaking” and “protected undertaking.” Protected undertakings have the right to refuse to provide information beyond what is specified in the voluntary standards when such information is requested by a reporting undertaking.
- It expands the range of information that companies may legally omit when disclosing sustainability information.
- It provides exemptions to the consolidated reporting obligations of in-scope parent companies. Specifically, parent companies are no longer subject to the CSRD reporting requirements when they qualify as financial holdings whose subsidiaries’ business models and operations are independent.
- It introduces a new single electronic reporting format, that must be used by reporting companies.
- It creates a digital portal for sustainability reporting where reporting companies can access information, guidance and support, including relevant templates.
Key Substantive Changes To The CSDDD:
- Directive (EU) 2026/470 removes the obligation for in-scope companies to adopt and put into effect a transition plan for climate change mitigation.
- It ensures that companies, when carrying in-depth assessments of their business partners regarding adverse impacts, request information from business partners only where that information is necessary.
- It introduces greater flexibility when a company identifies potential or actual negative impacts from its business partner, that cannot be prevented, mitigated, or reduced. Specifically, it provides for temporarily suspending the business relationship rather than terminating it, while granting the company legal protection during the implementation of its corrective action plan.
- It reduces the maximum limit of pecuniary penalties to 3% of the net worldwide turnover.
What Happens Next:
Directive (EU) 2026/470 will enter into force on March 18, 2026. Many delegated acts still need to be adopted by the Commission to make the frameworks effective. Additionally, Member States are required to transpose the new provisions amending the CSRD by no later than March 19, 2027, and those amending the CSDDD by no later than July 26, 2028.
