The European Commission's first Omnibus arrives - key takeaways

Introduction

Sustainability reporting requirements in the EU have undergone significant changes in recent years. The Corporate Sustainability Reporting Directive (CSRD) replaced the Non-Financial Reporting Directive (NFRD) and applies to entities with financial years ending on December 31, 2024. This directive is closely linked with the EU Taxonomy and the Corporate Sustainability Due Diligence Directive (CSDDD), which is yet to come into force.

Under the current framework, additional companies will fall under the CSRD and EU Taxonomy in 2025, 2026, and 2028.

In January 2025, the European Commission published the Competitiveness Compass outlining its vision for the next five years, focusing on strengthening the EU economy and reducing regulatory burdens. The key targets include:

  • Reducing administrative burdens by at least 25% for all companies
  • Reducing administrative burdens by at least 35% for SMEs

On February 26, 2025, the Commission introduced its first Omnibus package, aimed at simplifying and streamlining reporting requirements while ensuring transparency and alignment with the European Green Deal. The proposal includes revisions to the CSRD, EU Taxonomy, and CSDDD.

The proposed changes are expected to generate significant cost savings:

  • €4.4 billion in annual savings from CSRD/ESRS amendments
  • Additional cost reductions from CSDDD and EU Taxonomy adjustments
 
Key Amendments and Simplifications
CSRD – Less Burden, More Clarity

Reduced Scope

  • The CSRD threshold will apply to large companies with more than 1,000 employees (previously 250+).
  • This change reduces the number of in-scope companies by 80%, aligning CSRD more closely with CSDDD.
  • Smaller large companies can choose to report voluntarily using simplified standards to be developed by the European Commission, based on EFRAG’s Voluntary SME Standard.

Postponement of Reporting Requirements
To avoid unnecessary compliance costs, the reporting deadlines for Wave 2 and Wave 3 companies will be postponed by two years:

  • Wave 1 (unchanged): Large public interest entities (500+ employees) – reporting begins in 2025 (for FY 2024).
  • Wave 2 (postponed): All other large undertakings – now reporting starts in 2028 (for FY 2027).
  • Wave 3 (postponed): SMEs with listed securities – now reporting starts in 2029 (for FY 2028).

Revision of ESRS (European Sustainability Reporting Standards)

  • Fewer data points and clearer requirements
  • Greater alignment with existing EU financial and sustainability frameworks
  • Stronger interoperability with global sustainability standards

Sector-Specific Standards Removed

  • To reduce complexity, sector-specific ESRS standards will no longer be mandatory.
  • Companies can refer to existing international sector-based reporting frameworks instead.

Value-Chain Cap to Reduce SME Burden

  • The Voluntary SME Standard (VSME) will replace the LSME Standard as the "value-chain cap", ensuring that:
    • Companies cannot require SMEs to provide excessive sustainability data beyond what is mandated under CSRD.

Simplified Assurance Requirements

  • The requirement to move from limited to reasonable assurance is removed, reducing compliance costs.
  • The European Commission will issue targeted assurance guidelines by 2026, rather than creating a new assurance standard.
 
EU Taxonomy – Simplified and More Flexible

Undertakings Required to Report

  • Companies will only assess Taxonomy eligibility and alignment for financially material activities.
  • Activities will be considered non-material if they represent less than 10% of the KPI denominator.

Simplified Reporting Templates

  • 89% reduction in data points for credit institutions.
  • More concise, streamlined reporting for all businesses.

Voluntary and Partial Taxonomy Reporting

  • Large undertakings with net turnover under €450 million can opt out of Taxonomy reporting.
  • Those who choose to report must disclose only turnover and CapEx KPIs (OpEx KPIs become optional).
 
CSDDD – Reduced Compliance Burden

Postponement of Implementation

  • Transposition deadline delayed from July 2026 to July 2027.
  • First wave of companies now required to comply from July 2028 (instead of 2027).
  • General guidelines for implementation will be published earlier (July 2026) to ensure clarity.

Harmonization of Compliance Rules

  • Extended harmonization of due diligence requirements across Member States.
  • Reduced compliance cost for cross-border businesses.

Limiting Due Diligence to Direct Partners

  • Companies will only assess direct (tier 1) business partners, except in cases where plausible evidence of indirect adverse impacts exists.
  • This eases the burden on supply chains, particularly for SMEs.

SME Shield – Protecting Small Businesses from Excessive Requests

  • Large companies may only request sustainability information from SMEs if:
    • It aligns with the Voluntary SME Standard (VSME).
    • The data cannot be obtained by other reasonable means.

Eliminating the Mandatory Termination Clause

  • Companies are no longer required to terminate business relationships if due diligence steps fail.
  • Instead, companies can suspend relationships, reducing operational disruptions.

Simplified Stakeholder Engagement

  • Companies must only engage with "relevant" stakeholders rather than broad groups.
  • The definition of "stakeholder" is simplified to include:
    • Workers and their representatives
    • Individuals and communities directly affected

Less Frequent Periodic Assessments

  • Due diligence policy review frequency reduced from every 1 year to every 5 years.
  • This reduces compliance costs by up to 80%, while still allowing adjustments for new business models and risks.

Removal of the 5% Minimum Turnover Cap for Penalties

  • The fixed 5% turnover penalty cap is removed, allowing Member States more flexibility in defining penalties.

Removal of EU-Level Civil Liability

  • The EU-wide civil liability framework is eliminated, leaving liability provisions to Member States.
 
Conclusion

The Omnibus legislative package marks a significant shift towards reducing red tape and supporting business growth, while maintaining alignment with the EU’s Green and Digital transition goals.

This initiative will:

  • Lower administrative costs for businesses.
  • Create a clearer, more predictable regulatory environment.
  • Ensure sustainability compliance remains efficient and manageable.

For more details, visit the European Commission’s official website.