EU Omnibus package – reducing the burden of sustainability reporting: this is what you should know

On 25 February 2025, the European Commission (Commission) published its long-awaited Omnibus simplification package. The February Omnibus package is the first of a series of proposed measures to reduce regulatory and administrative burdens on European Union (EU) companies. The focus of the first package is on sustainability reporting and sustainability due diligence as the Commission’s proposals seek to amend the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), both of which were adopted during the previous legislative term. 

External events during the previous legislative term have led the Commission to create policies targeted at increasing the strategic autonomy of the continent. This led to the adoption of initiatives such as the Critical Raw Materials Act and the EU Chips Act.  Following the report by former Italian Prime Minister Mario Draghi on the EU’s competitiveness, the Commission further shifted its policy focus from an emphasis on sustainability and climate transition to a greater focus on competitiveness and making the EU a more attractive place to do business. An illustrative example of this is the renaming of the European Green Deal into the Clean Industrial Deal. 

The Commission’s proposal of the first Omnibus package must be seen in light of its changed priorities. It is also a response to criticism by industry that the EU is creating too much red tape, which makes it a less attractive place to operate in compared to other jurisdictions. The CSDDD was one of the most contentious legislative files that was adopted during the previous legislative term, both for legislators and the industry. Especially in the European Parliament, the proposed CSDDD framework led to splits between the Socialists and Democrats, who were more in favour of sustainability requirements, and the center-right European People’s Party, which profiles itself as more pro-business. Other files, such as the Deforestation Regulation and the Commission’s proposals to phase-out combustion-engine cars in the EU, have led to contention. The reopening of the CSDDD and CSRD through the first Omnibus package are therefore expected to lead to tough negotiations. 

The first Omnibus package discussed in this article is the first of a series of legislative initiatives the Commission will propose within its simplification agenda. Further Omnibus packages are expected in the field of agriculture, clean energy, defense and data protection, but a new regulatory framework may be added to this list over time.

This article presents a snapshot overview of the most important proposed changes companies should be aware of in terms of the first Omnibus package. 

1. Main amendments to the CSRD framework
   
   

   Topic	Current framework	Proposed Omnibus amendments
   Application	The CSRD framework applies to large public interest entities with over 500 employees. They need to report for the first time for financial year 2024. Other large companies should start reporting in 2026, and listed SMEs in 2027.	Large companies that do not currently need to report would need to start reporting from 2028 for financial years starting on or after 1 January 2027 at the earliest.
   Scope	Scope All large undertakings and all listed companies would have to do sustainability reporting eventually. Large undertakings are defined as undertakings which on their balance sheet dates exceed at least two of the following criteria: A balance sheet total of EUR 25 million. A net turnover of EUR 50 million. An average number of 250 employees during the financial year. Non-EU companies listed in the EU and non-EU companies that generate over EUR 150 million in the EU and that have either an EU branch with a turnover of over EUR 40 million or an EU subsidiary that is itself in the CSRD scope are included as well.	The scope of the CSRD is limited to large companies with more than 1,000 employes and a turnover of more than EUR 50 million or a balance sheet of over EUR 25 million. Listed SMEs will no longer be in scope of the CSRD framework. For non-EU companies, the scope is limited to those that have an EU turnover of over EUR 450 million and that have either an EU branch with a turnover of over EUR 50 million or an EU subsidiary that is itself in the updated CSRD scope. For companies that are not in scope, the Commission will adopt a voluntary reporting standard based on the voluntary sustainability reporting standard for non-listed micro, small and medium enterprises (VSME) published late last year. The VSME was developed for companies outside the scope of the CSRD that face sustainability requests from business counterparties that are.
   Reporting on the value chain	In-scope companies need to receive information from companies in their value chain for the purposes of sustainability reporting. An exception to this exists with regard to SMEs, whereby in-scope companies are not required to get information that exceeds the scope of information to be reported under a future proportionate standard for listed SMEs. This is referred to as the value-chain cap.	Companies required to report under the CSRD should not seek to obtain sustainability information from companies with less than 1,000 employees in its value chain that goes beyond the voluntary reporting standard for these companies (see previous section), with the exception of sustainability information that is commonly shared between undertakings in the sector concerned.
   Assurance	In-scope companies should seek limited assurance for their sustainability reporting. The Commission is mandated to adopt a standard for limited assurance by October 2026. The limited assurance requirement could become a reasonable assurance requirement in the future, and the Commission can adopt a standard on this by October 2028.	The requirement of obtaining a reasonable assurance and also the mandate for the Commission to adopt a standard for limited assurance by 2026 is removed. Instead, the Commission will be mandated to adopt these standards without a strict deadline and adopt targeted guidelines on assurance to address emerging issues that may generate unnecessary burdens on companies by 2026.
   Sector-specific standards	The Commission is mandated to adopt detailed reporting standards, also known as the European Sustainability Reporting Standards (ESRS). A first set of ESRS applicable to all in-scope companies was published in the EU Official Journal in December 2023. The Commission has been mandated to adopt sector-specific ESRS that would lay down specific additional reporting requirements for certain sectors.	The Commission will review the already applicable sector-agnostic ESRS and adopt a delegated act simplifying these standards six months following the entry into force of the amendments to the CSRD at the latest. In essence, the existing standards would be simplified, and no additional standards would be adopted. The Commission would no longer adopted sector-specific reporting standards.

   
   
2. Main amendments to the CSDDD framework
   
   

   Topic	Current framework	Proposed Omnibus amendments
   Application	Member States must transpose the CSDDD in their national laws by 26 July 2026. The rules become applicable on 26 July 2027 for EU companies with over 5,000 employees on average and a net worldwide turnover of more than EUR 1.5 billion, or third-country companies with a net EU turnover of more than EUR 1.5 billion. The rules become applicable on 26 July 2028 for EU companies with over 3,000 employees on average and a net worldwide turnover of more than EUR 900 million, or third-country companies with a net EU turnover of more than EUR 900 million. The rules become applicable on 26 July 2029 for EU companies with over 1,000 employees on average and a net worldwide turnover of more than EUR 450 million, or third-country companies with a net EU 450 million.	Member States must transpose the CSDDD in their national laws by 26 July 2027. The separate application date for EU companies with over 5,000 employees on average and a net worldwide turnover of more than EUR 1.5 billion, or third-country companies with a net EU turnover of more than EUR 1.5 billion is removed. Instead, the rules become applicable on 26 July 2028 for EU companies with over 3,000 employees on average and a net worldwide turnover of more than EUR 900 million, or third-country companies with a net EU turnover of more than EUR 900 million. In essence, this means that EU companies with over 5,000 employees on average and a net worldwide turnover of more than EUR 1.5 billion, or third-country companies with a net EU turnover of more than EUR 1.5 billion need to apply the CSDDD from 26 July 2028 as well.
   Financial undertakings	The Commission must publish a report on the necessity of laying down additional sustainability due diligence requirements tailored to regulated financial undertakings with respect to the provision of financial services and investment activities, and the options for such due diligence requirements as well as their impacts, by 26 July 2026.	The Commission is no longer required to publish a report on due diligence requirements for financial undertakings under CSDDD.
   Chain of activities	The CSDDD due diligence measures should cover the following chain of activities: (a)their own operations; (b) activities of a company’s upstream business partners related to the production of goods or the provision of services by the company, including the design, extraction, sourcing, manufacture, transport, storage and supply of raw materials, products or parts of the products and development of the product or the service; and (c) activities of a company’s downstream business partners related to the distribution, transport and storage of the product, where the business partners carry out those activities for the company or on behalf of the company.	The CSDD due diligence measures are limited to the companies’ own operations, those of their subsidiaries and those of their direct business partners. A direct business partner is defined as an entity with which the company has a commercial agreement related to the operations, products or services of the company or to which the company provides services. A company must carry out an in-depth assessment of an indirect business partner if it has plausible information that suggests that adverse impacts at the level of the operations of that indirect business partner has arisen or may arise.
   Monitoring	In-scope companies must assess and evaluate their due diligence measures under CSDDD on an annual basis.	In-scope companies must assess and evaluate their due diligence measures under CSDDD every five years.
   Stakeholders	In-scope companies must meaningfully engage with a large group of stakeholders and consult them when developing its due diligence obligations under the CSDDD, such as mapping actual or potential adverse impacts, developing action plans, when deciding to terminate or suspend a business relationship to bring an actual adverse impact to an end, and when the companies develop the criteria against which they will monitor the adequacy and effectiveness of the measures it takes to identify, prevent, mitigate and/or minimise the adverse human rights and environment-related impacts of their operations. A stakeholder is defined as: - The company’s employees; • The employees of its subsidiaries, trade unions and workers’ representatives; • Consumers and other individuals, groupings, communities or entities whose rights or interests are or could be affected by the products, services and operations of the company, its subsidiaries and its business partners, including the employees of the company’s business partners and their trade unions and workers’ representatives; and • National human rights and environmental institutions, civil society organisations whose purposes include the protection of the environment, and the legitimate representatives of those individuals, groupings, communities or entities.

Next steps

As mentioned above, the proposed amendments would relieve companies from a large number of obligations imposed by the CSRD and CSDDD by either carving out these companies from the current scope by increasing the quantitative threshold, or by simplifying or deleting obligations from the text of these two Directives. The Commission proposed a separate Directive that only covers the delayed application dates mentioned above. This so-called “stop the clock” proposal has been endorsed by both the European Parliament and the Council in a fast-track procedure and is expected to be formally adopted and published in the EU Official Journal before the Summer. This was to prevent that companies would initially have to implement the legal framework, after which they would either no longer need to abide by the frameworks at all or be subject to less burdensome requirements. The legislative proposal that amends the CSRD and CSDDD with regard to their contents is going to the legislative process in parallel, and it is widely expected that this process will take at least until the end of 2025.