CONTENTS
- 1. ESG Issues | The Significance of the Adoption of Omnibus I
- - Redesigning the Way EU ESG Regulation Operates
- 2. ESG Issues | Key Changes in the Revised CSRD and ESRS
- - The Importance of Value-Chain Disclosure and the Scope 3 Response
- - The Application Structure and Due-Diligence Method of the Revised CSDDD
- 3. ESG Issues | Practical Matters Korean Companies Should Note
- - Corporate Response Strategies and Methods of Legal Risk Management
- - Areas Where the Assistance of an Attorney Is Needed
1. ESG Issues | The Significance of the Adoption of Omnibus I
When it comes to ESG issues, building a system of advance prevention is more important than reacting after the fact.
As the Council of the EU officially adopted the Omnibus I Simplification Package on February 24, 2026, and published it in the Official Journal on February 26, 2026, a new regulatory framework surrounding the EU Corporate Sustainability Reporting Directive (CSRD) and the EU Corporate Sustainability Due Diligence Directive (CSDDD) is now coming into full operation.
On the surface, the reduction in scope of application, the decrease in data points, and the simplification of procedures are emphasized; however, it is not appropriate to interpret this immediately as deregulation.
In practice, this is because a redesign of value-chain disclosure methods, the codification of a cap on supply-chain information requests, the strengthening of the Scope 3 response system, and a transition to a risk-based due-diligence system are proceeding simultaneously.
Accordingly, Korean companies need to do more than merely confirm whether they are directly subject to the rules; they should re-examine how ESG issues operate within the entire structure connected to their EU corporations, subsidiaries, branches, partners, and customers.
Redesigning the Way EU ESG Regulation Operates
This Omnibus I can be viewed as legislation that redesigns the way EU ESG regulation operates in a more realistic and enforceable direction.
Whereas the existing framework presupposed a rapid expansion in the number of covered companies and the collection of extensive data, this amendment reduces the scope of direct application and instead shifts toward placing greater weight on the explainability of key risks, value-chain management, the feasibility of documentation, and the adequacy of supply-chain data requests.
For Korean companies in particular, it is difficult to assess risk solely on the basis of whether a company "has been excluded from direct application."
This is because, where an EU large-enterprise customer or a global prime contractor is subject to the CSRD or the CSDDD, its reporting and due-diligence obligations may be passed down along the supply chain to lower-tier companies.
Therefore, it is more accurate to understand this amendment not as a reduction in the scope of regulation, but as a shift to a structure that precisely transmits regulatory effects through the supply chain and transaction structures.
2. ESG Issues | Key Changes in the Revised CSRD and ESRS
Let us examine the key changes in the revised CSRD and ESRS.
(1) A Substantial Reduction in the Scope of the CSRD
The revised CSRD has greatly reduced the scope of application. Previously, large companies with 250 or more employees and others were broadly included; after the amendment, the thresholds have been raised as follows.
- EU companies (individual): more than 1,000 employees AND net turnover exceeding EUR 450 million
- EU companies (consolidated): more than 1,000 employees on a consolidated basis AND net turnover exceeding EUR 450 million
- Non-EU companies: net turnover within the EU exceeding EUR 450 million (for two consecutive years) AND an EU subsidiary or branch each exceeding EUR 200 million
- Listed small and medium-sized enterprises: excluded from mandatory application and shifted to voluntary reporting
As a result, the number of covered companies is expected to fall sharply from approximately 50,000 to roughly 3,000 to 5,000.
However, this means that the number of entities directly subject to the obligation has decreased; it does not mean that information requests directed at the supply chain will disappear.
(2) Expansion of the Subsidiary Exemption
The structure under which a subsidiary meeting certain requirements is exempt from its own disclosure obligation where the parent company makes a CSRD disclosure has been retained, and this amendment has expanded its scope.
This can be a factor that reduces the practical burden for companies with multiple subsidiaries within the EU.
(3) Abolition of Sector-Specific ESRS
Previously, there was a possibility that sector-specific ESRS would be additionally adopted, but this amendment has removed that authority.
Accordingly, the 12 standards of the existing ESRS Set 1 or of the simplified ESRS become the center of mandatory reporting.
(4) The Level of Assurance Is Fixed at Limited Assurance
The existing CSRD had left open the possibility of a future transition to reasonable assurance, but the amendment has removed this and provides that only limited assurance is to be retained.
That said, the limited-assurance standards themselves are scheduled to be established by July 1, 2027, so the assurance burden has not entirely disappeared.
(5) The Draft Simplified ESRS
On December 3, 2025, EFRAG submitted the draft simplified ESRS to the EC, and its key points are as follows.
In other words, going forward, the approach of selecting key risks and explaining the basis for that judgment will become more important than the approach of listing large amounts of data.
The Importance of Value-Chain Disclosure and the Scope 3 Response
(1) Introduction of the Value-Chain Cap
The revised CSRD has introduced an important limitation with respect to value-chain disclosure.
Supply-chain companies with 1,000 or fewer employees may lawfully refuse information requests that exceed the voluntary reporting standard under Art. 29ca, and a company subject to the CSRD is deemed to have fulfilled its reporting obligation even if it relies only on the information it has obtained within that scope.
(2) The Transition Period and the Use of Estimates
The three-year transition period for value-chain disclosure is now calculated from the date on which the relevant company's disclosure obligation begins, rather than from the date a Member State's domestic law takes effect.
In addition, after the transition period ends, the use of estimates is permitted within a certain scope.
However, a disclosure may not be omitted merely on the ground that data is unavailable; the company must also explain the reasons for the failure to obtain the data, the efforts made to obtain it, and its future plans.
(3) Scope 3 Is Exceptionally Strict
Scope 3 emissions require particular attention, unlike other indicators.
The draft simplified ESRS permits partial reporting for most indicators; however, for total Scope 1, 2, and 3 emissions (ESRS E1-8), it does not permit partial reporting, on the ground of alignment with the GHG Protocol.
In other words, after the transition period ends, one of the following must be used.
- direct data
- estimates based on the GHG Protocol
However, the approach of partially excluding relevant Scope 3 categories on the ground of data gaps is not permitted.
The Application Structure and Due-Diligence Method of the Revised CSDDD
(1) The Application Structure of the Revised CSDDD
The revised CSDDD limits its scope of application primarily to large-scale companies.
- Companies within the EU: more than 5,000 employees AND worldwide net turnover exceeding EUR 1.5 billion
- Companies outside the EU: net turnover within the EU exceeding EUR 1.5 billion
- Franchise/license structures: net turnover within the EU exceeding EUR 275 million AND royalties within the EU exceeding EUR 75 million
The implementation schedule is as follows.
- July 26, 2028: deadline for transposition into Member States' domestic law
- July 26, 2029: full application to companies
- fiscal years commencing on or after January 1, 2030: application of the obligation to publish an annual due-diligence status
(2) The Risk-Based Due-Diligence Structure
The revised CSDDD does not limit the scope of due diligence to Tier 1 business partners; rather, it covers the entire chain of activities, including direct and indirect business partners.
However, it does not investigate every area with the same intensity; instead, it adopts a risk-based approach that prioritizes the areas where adverse impacts are most likely to occur and are most severe.
(3) Limits on Information Requests
Requests for information directed at partner companies must be clear in purpose, reasonable, and proportionate.
In particular, with respect to partner companies with fewer than 5,000 employees, a company must first use information it already holds or information obtainable through other sources, and additional requests are permitted only where this is not the case.
(4) The Monitoring Cycle and Measures Regarding Business Relationships
The minimum monitoring cycle has been extended from the previous one year to five years, but a reassessment must be carried out at any time if a significant risk arises or a change occurs.
In addition, even where a potential adverse impact cannot be mitigated, the response is no longer to terminate the business relationship immediately as before; instead, it has been recalibrated to center on suspension, making more gradual measures possible.
(5) Liability and Sanctions
The unified EU-level civil-liability framework has been removed; however, administrative penalty surcharges may still be imposed up to a maximum of 3% of worldwide turnover.
(6) Climate Transition Plans
Although the obligation to adopt and implement a climate transition plan at the level of the CSDDD itself has been removed, the disclosure of a climate transition plan under ESRS E1-1 remains in effect.
In other words, the legal obligation structure of climate-related strategy has changed somewhat, while the demands of the market and stakeholders have weakened.
3. ESG Issues | Practical Matters Korean Companies Should Note
While it is true that this amendment has reduced the number of entities directly subject to the rules, Korean companies may still fall within the scope of regulatory influence in the following ways.
First, companies must re-examine whether the size of their EU corporations, subsidiaries, and branches meets the thresholds of the revised CSRD.
In particular, they need to verify their employee numbers, turnover within the EU, and whether the consolidated thresholds are met right away.
Second, companies should monitor how key export-destination countries such as Germany, France, and the Netherlands transpose the rules into domestic law.
Because whether Wave 1 companies are exempt from the FY2025-2026 reporting obligation rests with each Member State's discretion, the conclusion is likely to differ from country to country.
Third, it is advisable to use the VSME and the Art. 29ca voluntary reporting standards as the benchmark for supply-chain consultations.
This is because these standards are likely to function in the future as the cap on EU supply-chain data requests.
Fourth, companies should first build a key data-collection system based on the existing ESRS Set 1.
Because the existing standards will continue to apply until the simplified ESRS is finalized, it is realistic to secure a minimum response system centered on ESRS E1 (climate change) and ESRS 2 (general disclosures).
Corporate Response Strategies and Methods of Legal Risk Management
Areas Where the Assistance of an Attorney Is Needed
ESG issues are now a matter in which legal affairs, compliance, accounting, sales, and procurement are combined at the same time.
In particular, the assistance of an attorney is needed in the following areas.
- determining whether the CSRD and CSDDD apply directly and whether an exemption is available
- interpreting EU corporation and branch structures and the consolidated thresholds
- reviewing the lawfulness of ESG data requests from customers and prime contractors
- arranging clauses on document submission, representations and warranties, and indemnification in supply-chain contracts
- reviewing risks related to Scope 3 disclosure and the GHG Protocol
- designing and documenting the ESG due-diligence process
- responding to risks of penalty surcharges, disputes, and termination of transactions
Going forward, ESG issues are likely to come down to more than the difference between companies that disclose well and those that do not; they may come down to the difference between companies that can maintain their supply chains and those that cannot, and between companies that have an explainable risk-management system and those that do not.
Therefore, what is needed now should be regarded as a proactive response that redesigns the legal, contractual, supply-chain, and data systems together.
Daeryun Law Firm LLP has corporate attorneys and attorneys experienced in resolving ESG issues who work together with local law firms around the world to identify measures for preventing ESG issues from arising for client companies.
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