The EU’s Omnibus Proposal: Objectives and Next Steps

 

In February 2025, the European Commission introduced the first Omnibus package of sustainability rules, aiming to simplify and ease EU sustainability reporting requirements. While these revisions seek to reduce administrative burdens, they have also raised concerns about regulatory uncertainty and potential setbacks in sustainability efforts.

Background

As part of the European Green Deal, which aims for climate neutrality by 2050 and a more sustainable, circular economy, the EU has established three key sustainability directives and regulations:

• Corporate Sustainability Reporting Directive (CSRD) – Mandates companies to disclose their environmental, social, and governance (ESG) performance.
• EU Taxonomy Regulation (EU Tax-VO) – Provides a classification system to determine which economic activities are environmentally sustainable.
• Corporate Sustainability Due Diligence Directive (CSDDD) – Ensures companies adopt sustainable and responsible practices throughout their operations and global value chains.

These regulations are intended to create clear, consistent frameworks, ensuring a level playing field for sustainability efforts while addressing both environmental and social impacts.

Key Changes in the CSRD

The Omnibus proposal introduces several major adjustments to the CSRD, including:

• Delayed Reporting Requirements – Companies in wave 2 and wave 3 categories will have an additional two years before their reporting obligations take effect.
• Narrower Scope – The CSRD will now apply only to large companies and parent companies of large groups with:
  • An average of 1,000 employees
  • Either €25 million in total assets or €50 million in annual turnover
• Updated Third-Country Thresholds – Companies from outside the EU will be subject to CSRD rules if they:
  • Generate €450 million in net turnover within the EU
  • Have a large subsidiary or branch generating €50 million in turnover
• Flexible EU Taxonomy Reporting – Certain companies will be given more leeway in how they report their sustainability data.
• Removal of Assurance Requirements – The obligation to adopt a reasonable assurance standard has been eliminated, as has the option to introduce a reasonable assurance requirement. Instead, the Commission will issue targeted assurance guidelines by 2026.

Key Changes to the EU Taxonomy Regulation

• Reduced Scope for EU Taxonomy Compliance – Currently, all CSRD-covered companies automatically fall under the EU Taxonomy Regulation. The new proposal limits full compliance to only the largest firms, specifically those covered by CS3D. Companies that meet CSRD criteria but not CS3D thresholds can opt in voluntarily.
• New Reporting Flexibility –
  • Large companies (1,000+ employees, €50 million turnover or €25 million in total assets) with net turnover below €450 million that claim alignment with the EU Taxonomy must disclose their turnover and CapEx KPIs, but may choose whether to disclose OpEx KPIs.
  • Companies that do not claim alignment with the EU Taxonomy will not be required to comply with the reporting rules, eliminating their associated costs.
  • The proposal also introduces more flexible disclosure options, allowing companies to report on activities that meet some, but not all, of the Taxonomy’s technical screening criteria.

Key Changes to the CSDDD

1. Narrower Due Diligence Scope – Now applies only to direct business partners rather than the entire supply chain.
2. Less Frequent ESG Assessments – Companies must conduct ESG impact reviews every five years instead of annually.
3. Extended Compliance Timeline – Implementation is postponed to July 2028 (previously July 2027).
4. SME Protection – Safeguards introduced to prevent excessive data requests from smaller businesses.

 

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