EU Omnibus Directive 2026 Explained: What Changed and What It Means for Carbon Reporting

For four years, the direction of travel in EU sustainability policy was one way: more companies in scope, more data required, more assurance. In February 2026, that changed.

The EU's Omnibus I Directive cut the number of businesses subject to mandatory sustainability reporting, delayed some of the rules that remain, and introduced limits on the sustainability information larger companies can request from smaller businesses in their value chains.

It is one of the most significant rewrites of EU corporate sustainability law since the Green Deal began. It is also widely misunderstood. Some coverage has framed it as the end of sustainability reporting in Europe. It is not.

What it changes is who has a legal obligation to report. It does not mean that companies outside the scope of mandatory reporting can ignore carbon data. For businesses supplying larger companies, customer requests, procurement requirements and commercial expectations can still make emissions data important.

Here is what the Omnibus actually does, when each part takes effect, and what it means if your business is in the supply chain of a company that still has to report.

What is the EU Omnibus Directive? 

The EU Omnibus is a package of changes to sustainability rules designed to reduce the reporting burden on businesses and improve competitiveness.

In February 2025, the European Commission published its Omnibus I proposals. The package covered four areas: corporate sustainability reporting, corporate sustainability due diligence, the EU Taxonomy, and the Carbon Border Adjustment Mechanism (CBAM).

These changes moved through different legal instruments and on different timelines. The main piece of legislation, and the one most people mean when they refer to the "Omnibus Directive", is Directive (EU) 2026/470.

Adopted on 24 February 2026 and published in the Official Journal on 26 February, the directive entered into force on 18 March 2026. It amends four existing pieces of EU law:

• The Corporate Sustainability Reporting Directive (CSRD), Directive (EU) 2022/2464.
• The Corporate Sustainability Due Diligence Directive (CSDDD, also known as CS3D), Directive (EU) 2024/1760.
• The Accounting Directive, Directive 2013/34/EU, which contains the underlying corporate reporting requirements.
• The Audit Directive, Directive 2006/43/EC, which covers statutory audit and assurance requirements.

The EU Taxonomy and CBAM changes were handled separately through their own legal instruments. Both are covered below, because both form part of the wider Omnibus package.

EU Omnibus Directive key dates and timeline  

Which EU sustainability rules does the Omnibus change? 

How does the Omnibus change the CSRD? 

The CSRD is the EU law requiring certain companies to publish sustainability information subject to external assurance, including full-scope greenhouse gas emissions.  Reporting follows a detailed rulebook called the European Sustainability Reporting Standards (ESRS).

The Omnibus narrowed the scope sharply.

The phased "wave 1, wave 2, wave 3" structure has gone. Companies that reported for financial year 2024 but now fall below the thresholds can be exempted by their member state for financial years beginning between 1 January 2025 and 31 December 2026. Everyone in the new scope reports on financial years starting on or after 1 January 2027, with first reports landing in 2028. Non-EU companies follow a year later.

Law firm William Fry, summarising the changes for the Chartered Governance Institute, estimates that roughly 80% of companies previously caught by the CSRD and CSDDD have been taken out of scope.

Our full guide to the directive as it now stands is here: The CSRD explained.

How does the Omnibus change the ESRS? 

The Omnibus instructed the Commission to simplify the reporting standards themselves, on the basis that cutting scope alone would not reduce cost enough for the very large companies that remain in scope.

On 3 July 2026 the Commission adopted a revised set of ESRS. The changes prioritise quantitative data over narrative text, draw a clearer line between mandatory and voluntary disclosures, clarify how the materiality assessment should be applied, and remove over 60% of mandatory datapoints. Double materiality, the principle that companies report both how sustainability issues affect them and how they affect people and the environment, is unchanged.

The revised standards are intended to apply to financial years starting on or after 1 January 2027. Companies already reporting under the CSRD may be able to apply them early for financial year 2026, once the revised standards have entered into force. 

The Commission adopted the revised ESRS on 3 July 2026. They must complete the European Parliament and Council scrutiny process before they take effect. The scrutiny period is 2 months, with the possibility of an extension of a further 2 months. 

For companies that remain within the CSRD scope, the revised standards should make reporting less burdensome. But they do not remove the need to collect reliable sustainability data, including greenhouse gas emissions where required.

Read more: The European Sustainability Reporting Standards: what's changed.

How does the Omnibus change the VSME?

Alongside the revised ESRS, the Commission adopted a delegated act establishing a sustainability reporting standard for voluntary use, based on the VSME standard developed by EFRAG and recommended by the Commission in July 2025. The standard must complete the relevant legal process before it takes effect. 

This is the most relevant piece of the Omnibus for most mid-market and smaller businesses, because it does 2 things at once. It gives companies outside the CSRD a recognised format for disclosure, and a legal ceiling on the sustainability information that CSRD reporting companies can require from protected smaller businesses in their value chains. 

First, it gives smaller businesses a recognised format for reporting. The VSME standard provides a consistent way to disclose information such as greenhouse gas emissions, energy use and other sustainability data. Rather than completing a different questionnaire for every large customer, businesses can use the standard to structure their reporting and respond to requests more efficiently.

Second, it limits what larger customers can ask for. Under the revised CSRD, companies with more than 1,000 employees cannot require businesses with 1,000 or fewer employees in their value chain to provide more sustainability information than the voluntary standard allows. This gives smaller suppliers a clearer limit on the reporting burden larger customers can place on them.

Read more: VSME: what the EU's voluntary standard for SMEs means.

How does the Omnibus change the CSDDD?

The Corporate Sustainability Due Diligence Directive (CSDDD) requires very large companies to identify and address human rights and environmental harms connected to their operations and supply chains. The Omnibus reduced its scope and reach considerably:

• Thresholds rose from 1,000 employees and €450 million turnover to more than 5,000 employees and more than €1.5 billion net worldwide turnover. For non-EU companies, the trigger is €1.5 billion of EU turnover, with no employee test.
• The directive moves from a broad full-value-chain mapping requirement towards a more targeted, risk-based approach, using reasonably available information to identify where in-depth assessment is needed.
• Companies may only request information from business partners with fewer than 5,000 employees where it cannot reasonably be obtained another way.
• The obligation to adopt and implement a climate transition plan has been repealed in full.
• The EU-level civil liability regime has been removed, with liability determined under national law instead, and penalties capped at 3% of net worldwide turnover.

For smaller businesses, the practical change is that fewer companies will be subject to the CSDDD, and those that remain have less extensive due diligence obligations. But if you supply a company that still falls within the scope, its need to understand and manage sustainability risks in its supply chain has not disappeared.

Read more: The CSDDD: what businesses need to know.

How does the Omnibus change the EU Taxonomy?

The EU Taxonomy is the EU's classification system for environmentally sustainable economic activities. Companies in scope of the CSRD report what share of their turnover, capital expenditure and operating expenditure aligns with it.

A delegated act adopted on 4 July 2025 was published in the Official Journal on 8 January 2026 and entered into force on 28 January 2026. It introduces a 10% materiality threshold, allowing companies to leave out activities that fall below that share of the relevant KPI, and shortens the reporting templates. It applies from 1 January 2026, with companies able to use the simplified approach for the 2025 financial year.

How does the Omnibus change CBAM?

The Carbon Border Adjustment Mechanism puts a carbon price on certain imports into the EU: iron and steel, aluminium, cement, fertilisers, electricity and hydrogen. Regulation (EU) 2025/2083, which came out of the same Omnibus package, entered into force on 20 October 2025.

The main change is a new de minimis threshold. Importers bringing in 50 tonnes or less of covered goods per year, measured by cumulative net mass, are exempt from CBAM obligations altogether. Hydrogen and electricity are excluded from the exemption. The Commission's own figure is that this removes around 90% of importers while still covering 99% of embedded emissions. The annual reporting deadline also moved from 31 May to 30 September.

The definitive regime started on 1 January 2026. Certificate sales begin in February 2027, covering emissions from 2026 imports.

Read more: EU CBAM explained.

Who is affected by the EU Omnibus Directive? 

The Omnibus affects businesses in different ways depending on their size, activities and relationships with larger companies. Some businesses remain directly subject to EU sustainability rules, while many others are affected indirectly through customer, lender and supply chain requirements. 

Who is directly affected by the EU Omnibus Directive

Directly affected means a legal obligation sits with your business. After the Omnibus, this is a much shorter list:

• EU companies and EU-listed issuers with more than 1,000 employees and more than €450 million in net turnover
• Non-EU parent groups with more than €450 million in EU turnover for each of the last 2 consecutive financial years, where the relevant EU subsidiary or branch meets the applicable threshold
• Companies with more than 5,000 employees and €1.5 billion in net worldwide turnover, for due diligence
• Importers of covered CBAM goods above the applicable 50-tonne annual threshold

Who is indirectly affected by the EU Omnibus Directive?

Most businesses outside the direct scope of the Omnibus will still feel its effects through their commercial relationships.

If you supply a company that must report under the CSRD, it may ask you for emissions data to help calculate its Scope 3 footprint. Similar requests may come from larger customers responding to their own reporting, procurement or supply chain requirements.

The Omnibus limits how much sustainability information larger companies can require from smaller suppliers. It does not mean that every business outside the CSRD will be free from carbon-data requests.

What does the EU Omnibus Directive mean for carbon reporting?  

1. There is now a cap on what CSRD reporters can require from you. Companies with 1,000 employees or fewer in the value chain of a CSRD reporter are defined in the directive as “protected undertakings”. For CSRD reporting, they cannot be required to provide more information than the voluntary standard allows. If a reporter asks for more, it must identify the additional information and explain that the protected undertaking can refuse it. 

Three limits are worth knowing. The cap only applies to information requested for CSRD reporting, so it does not cover due diligence, CBAM, procurement frameworks or commercial questionnaires. It does not stop voluntary sharing. And you can determine your own size by self-declaration, which the reporting company is not required to verify.

2. Climate transition plans lost a legal driver, not their commercial value. Repealing the CSDDD climate transition plan obligation removes one legal requirement to produce one. It does not change B Corp's requirements, the SBTi's framework, investor expectations or public sector procurement, all of which can still ask for a costed, quantified reduction plan. 

3. Assurance expectations are settling rather than escalating. Limited assurance remains the standard for CSRD reporting, and the move towards reasonable assurance has been dropped. For suppliers, the relevant point is that reporters will keep favouring data that has been checked by someone credible, because their own assurance provider has to be comfortable with it. 

4. Data quality still decides the outcome. Whichever framework applies, the difference between a spend-based estimate and activity data is the difference between a number that tracks your turnover and a number that falls when you actually cut emissions. That has not changed, and the revised ESRS lean further towards quantitative disclosure, not less. 

5. Fewer companies have to report under EU sustainability rules, but carbon data is still needed elsewhere. The CSRD's scope cut does not touch the other reasons a business measures emissions: PPN 006 Carbon Reduction Plans for public sector bids, SECR in the UK, B Corp's Climate Action topic, ISO 14064, EcoVadis, CDP, or a customer questionnaire with a contract attached. 

How Seedling can help

The Omnibus may change whether you have to report under EU sustainability rules, but it does not remove the need to have reliable carbon data ready for customers, tenders and other requirements. Seedling is a carbon management platform that pairs software with a named carbon expert, used by more than 500 businesses. For companies navigating the changes, 3 things tend to matter:

• A full-scope footprint that works across frameworks. Scopes 1, 2 and 3 measured in line with the GHG Protocol, built on activity data rather than spend alone, so the same dataset can support a customer questionnaire, an EcoVadis submission, a B Corp assessment or an ESRS E1 disclosure.
• Supplier and employee data collection built in. Our supplier engagement tool sends a straightforward request and feeds responses directly into your footprint, which is useful whether you are the business being asked for data or the one asking for it.
• Reporting outputs in the format required, plus a quantified Net Zero plan, reviewed by a carbon expert before it goes anywhere near a customer or an auditor.

If you have been asked for carbon data and are not sure what the request actually requires, our team is happy to talk it through.

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