The European Commission’s Omnibus Proposal, introduced on 26th February 2025, represents a significant recalibration of EU sustainability regulations. Targeting CSRD, CSDDD, the EU Taxonomy, and CBAM, the proposal aims to reduce compliance burdens, imprve alignment with global standards, and enhance European competitiveness. The European Commission estimates that the changes will cut regulatory obligations by at least 25% overall and 35% for SMEs, unlocking €6.3 billion in annual administrative cost savings.
What the EU Omnibus Aims to Address
The Omnibus Proposal is a response to growing concerns from businesses and policymakers about the complexity and administrative weight of sustainability regulations. It also reflects broader European competitiveness strategies, as outlined in Mario Draghi’s recent report, which emphasizes closing Europe’s innovation gap with global competitors while leveraging leadership in clean technology and decarbonization.
Additionally, stakeholders have advocated for greater regulatory alignment between EU rules and global sustainability frameworks, prompting the Commission to refine its approach. Rather than scaling back sustainability commitments, the proposal shifts the emphasis from compliance-heavy frameworks toward enabling sustainable investment and long-term value creation.
Alongside the Omnibus, the EU has introduced the Clean Industrial Deal, establishing a €100 billion Industrial Decarbonization Bank and relaxing state aid rules for clean energy projects. Together, these initiatives aim to shift corporate resources from compliance to real sustainability action and investment in the green transition.
Breakdown of Key Regulatory Adjustments
1. Corporate Sustainability Reporting Directive (CSRD)
Scope Reduction – The number of companies required to report under CSRD will decrease by 80%, now covering only those with 1,000+ employees and either €50M turnover or €25M in total assets. Listed SMEs will no longer be required to comply.
Lower Reporting Complexity – Sector-specific reporting requirements are eliminated, and mandatory disclosure data points will be reduced by two-thirds.
Delayed Compliance Deadlines – Large undertakings and listed SMEs that have not yet implemented CSRD now have until 2028 instead of 2026.
Double Materiality Maintained – The principle of double materiality remains intact, ensuring companies continue assessing both financial and environmental impacts.
No Upgrade to Assurance Requirements – Plans to transition from limited to reasonable assurance by 2028 have been removed, keeping the current limited assurance approach.
2. Corporate Sustainability Due Diligence Directive (CSDDD)
Focus on Direct Suppliers – Companies are no longer required to assess all indirect suppliers, unless clear evidence of risks exists.
Extended Due Diligence Review Periods – Companies will now conduct due diligence assessments every five years instead of annually.
Protection for SMEs – Direct business partners with fewer than 500 employees cannot be required to provide detailed sustainability data unless voluntarily opting in.
Narrowed Stakeholder Engagement – Businesses now need to engage only with directly affected stakeholders, simplifying engagement requirements.
Enforcement Deferred to Member States – The harmonized EU-wide liability framework has been removed, allowing each country to set its own legal enforcement approach.
3. EU Taxonomy
Reduced Scope for Mandatory Taxonomy Reporting – Only companies with more than 1,000 employees and €450M+ turnover will be required to report in accordance with EU Taxonomy. Others may opt in voluntarily.
Simplified Disclosure Requirements – The number of required disclosure tables will be reduced by two-thirds for non-financial entities and further simplified for financial institutions.
Materiality Threshold Introduced – Companies will no longer need to assess Taxonomy eligibility if the activity accounts for ≤10% of their turnover, CapEx, or total assets.
Voluntary OpEx Reporting – Companies may opt-in for operational expenditure (OpEx) reporting, further reducing the compliance burden.
4. Carbon Border Adjustment Mechanism (CBAM)
Exemptions for Small Importers – Companies importing less than 50 tonnes per year (~80 tonnes CO₂ equivalent) will be exempt from CBAM obligations.
Delayed Full Implementation – The final phase of CBAM will be postponed until 2027, allowing businesses more time to adapt.
Simplified Carbon Certificate Requirements – Importers must now hold certificates covering only 50% of their reported emissions, down from the previous 80% requirement.
Streamlined Reporting & Compliance – Companies can delegate CBAM declarations to third parties, reducing administrative burdens.
EU Omnibus Proposal Timeline - Steps from directive proposal to national law
Stage | What Happens |
1. Legislative Proposal | The European Commission published the Omnibus Simplification Package proposal on February 26, 2025. The proposal will now be sent to the European Parliament and the Council of the EU for review. |
2. First Reading | Parliament reviews the Commission’s proposal. They may adopt the proposal or suggest amendments. Then the Parliament’s proposal is sent to the Council, which may accept or propose revisions, which are then sent back to Parliament. |
3. Negotiations | Negotiations take place between the Commission, Parliament, and Council to resolve differences and reach a compromise before the second reading. |
4. Second Reading | Negotiations take place between the Commission, Parliament, and Council to resolve differences and reach a compromise before the second reading. |
5. Conciliation | The conciliation committee resolves disagreements between Parliament and Council on the amendments. The agreed-upon text is sent for a third reading. |
6. Third Reading | Final approval of the agreed text. If both Parliament and Council approve, the directive is formally adopted. If not, the proposal is rejected, and the legislative process ends. |
7. Adoption & Implementation | The directive is adopted and published. Member states are then required to implement it into their national laws within a set period, usually two years, to comply with the new sustainability regulations. |
Recommended Actions for Businesses
While the Omnibus Proposal refines compliance requirements, businesses should continue prioritizing sustainability as a long-term strategy. Climate change remains a key driver of business resilience and competitiveness. Here’s what companies should do:
Continue Investing in Sustainability – Sustainability is a long-term business driver, not just a compliance task. Investing in decarbonization, energy efficiency, and sustainable supply chains will enhance competitiveness, reduce costs, and meet stakeholder expectations.
Maintain Current Reporting Practices – Even with reduced regulatory requirements, sustainability data remains critical for investors, customers, and business partners. Companies should continue tracking and disclosing key metrics to stay ahead of future reporting needs.
Monitor Legislative Developments – The Omnibus Proposal is still under review, and further changes may come. Businesses should stay updated and be prepared to adapt sustainability strategies as regulations evolve.
Invest in Transparency & Stakeholder Engagement – Sustainability reporting is more than compliance—it’s a tool for strengthening brand reputation and building trust. Clear, data-driven communication with investors, customers, and regulators will remain essential.
Leverage Sustainability for Cost Reduction – Sustainability initiatives don’t just benefit the planet—they improve efficiency and cut costs. Optimizing energy use, waste management, and logistics can create financial savings while enhancing sustainability performance.
Next Steps: What Lies Ahead?
The EU Omnibus Proposal is progressing through the legislative process, but its final approval and national transposition could take time. To prevent companies from having to comply with existing CSRD, CSDDD, and EU Taxonomy rules before the new Omnibus adjustments take effect, the EU has introduced a ‘stop-the-clock’ Directive. This would delay CSRD and Taxonomy reporting by two years and CSDDD implementation by one year. While the proposal has broad support, EU directives typically take years for full approval and implementation - CSRD, for instance, took over two years. If the pause is not finalized by the end of 2025, companies in Wave 2 (large undertakings) may still need to report for the 2026 cycle. This uncertainty is especially relevant for non-EU companies with in-scope EU subsidiaries, as they may still need to meet 2025 reporting obligations under existing rules.Businesses should remain proactive, monitor legislative developments, and align sustainability strategies with the evolving regulatory landscape to ensure compliance and long-term value creation.
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