Introduction
Just over a year ago, the European Commission unveiled an “Omnibus I” package of proposals aimed at simplifying EU sustainability rules to boost competitiveness. We reported in March 2025 on those proposals – which promised to remove roughly 80% of companies from the scope of EU sustainability reporting requirements – and provided a further update in April 2025 when the EU adopted a “Stop-the-clock” directive to delay upcoming Corporate Sustainability Reporting Directive (CSRD) deadlines and the Corporate Sustainability Due Diligence Directive (CS3D) timeline.
One year later, the Omnibus I package has been implemented pursuant to Directive (EU) 2026/470 (2026 Directive). The 2026 Directive, which amends Directives 2006/43/EC, 2013/34/EU, (EU) 2022/2464 and (EU) 2024/1760 as regards certain corporate sustainability reporting requirements and certain corporate sustainability due diligence requirements will take effect on 18 March 2026.
In this article, we outline the key changes introduced under the 2026 Directive and consider what they will mean for Irish companies.
CSRD: Simplified Sustainability Reporting
The CSRD will be significantly narrowed in scope and burden, should the agreement be adopted into law. The main changes are as follows:
- Much fewer companies in scope: Only very large companies will fall under the CSRD’s reporting obligations moving forward. Specifically, the CSRD will apply to companies with over 1,000 employees and annual net turnover above €450 million (as compared to the previous threshold of 250 employees), with listed small and mid-sized enterprises (SMEs) excluded entirely. Non-EU companies with substantial EU operations (meeting the €450m EU turnover threshold) will likewise be subject to reporting under the CSRD.
- Exemptions for certain entities: EU parent holding companies whose sole purpose is holding shares (financial holding undertakings) are now exempted from the CSRD’s scope. This means pure holding companies will not need to prepare separate sustainability reports at the group level.
- Transitional relief for former in-scope companies: Companies that had been due to start CSRD reporting in 2024 (the so-called “wave one” companies), but which no longer meet the new 1,000+ employee/€450m criteria will get a reprieve. The provisional deal provides that such companies falling out of scope will not be required to report for financial years 2025 and 2026. This eases the compliance burden on companies that were preparing first-time reports under the original rules.
(CS3D) Simplified Sustainability Due Diligence
The CS3D – which will require in scope companies to identify and address human rights and environmental impacts in their operations and supply chains – is also being pared back to focus on only the biggest players and most salient risks. Key agreed changes include:
- Higher company thresholds: The due diligence duty will apply only to the largest companies. EU businesses must have over 5,000 employees and €1.5 billion in net turnover globally to fall in scope. Foreign companies will likewise be covered if they generate €1.5bn+ turnover within the EU.
- Risk-based supply chain focus: Companies’ due diligence efforts are to be focused on the areas of their value chain where actual or potential adverse impacts are most likely to occur, rather than requiring exhaustive checks of every supplier. When a company has identified adverse impacts equally likely or equally severe in several areas, they are given the ability to prioritise assessing adverse impacts which involve direct business partners. Companies are also no longer obliged to conduct a comprehensive mapping of every indirect partner; a general scoping exercise using “reasonably available” information will suffice. This change aims to reduce the trickle-down burden of data requests on smaller suppliers while still ensuring large companies address the most serious risks.
- No mandatory climate plan: The requirement for in-scope companies to adopt a climate transition plan has been removed entirely. Eliminating this obligation is intended to significantly ease administrative costs for companies, though it has been controversial from a sustainability standpoint. However, the requirement to disclose a climate transition plan (if one exists) remains under the CSRD framework.
- Liability regime adjusted: In a notable softening, the EU will remove the proposed harmonised civil liability provisions from the CS3D. Instead, any civil liability for human rights or environmental damages will depend on existing national laws, as is currently the case. When it comes to penalties, the co-legislators agreed on a maximum cap of 3% of the company’s net worldwide turnover with the Commission issuing the necessary guidelines in this regard.
- Extended timeline: The CS3D’s timeline will be pushed out. EU countries will have until 26 July 2028 to transpose the CS3D into national law (one year later than previously planned), and companies falling in scope will need to comply by July 2029. This extra time, coupled with an earlier issuance of guidance, gives businesses a longer runway to prepare for compliance.
Implementation of the 2026 Directive in Ireland
The Department of Enterprise, Trade and Employment (DETE) has not yet clarified when it intends to implement the 2026 Directive. However, this is not surprising considering that Ireland and other member states have until 19 March 2027 to transpose the amendments related to the CSRD (and the Accounting Directive) and the deadline for transposing the amendments to the CS3D is 26 July 2028.
Minister Peter Burke has expressed strong support for the simplification and burden reduction agenda to which the 2026 Directive gives effect and stated his intent to prioritize implementing these changes in Ireland to provide legal certainty for businesses. Hence, the DETE is expected to eventually amend Part 28 of the Companies Act 2014 to align Irish law with the narrower scope and reduced reporting obligations mandated by the 2026 Directive.
Conclusion
The 2026 Directive is broadly welcome news for Irish businesses. A considerable number of companies will now fall out of scope entirely. Likewise, the vast majority of Irish companies will not be subject to the CS3D due diligence obligations considering the much higher threshold.
The easing of mandatory requirements does not diminish the importance of sustainability and ESG issues for businesses. As we have highlighted before, “what gets measured gets managed” – companies that proactively monitor and address sustainability and human rights issues can increase the value of their business and better manage risks over the long term.
For more information, please contact John Gaffney or your usual contact in Beauchamps.
