The Omnibus Simplification Package proposal has arrived

In its Communication on the Competitive Compass for the EU, the Commission announced a first ‘Omnibus Sustainability Package’ (Omnibus I), including far-reaching simplifications regarding several sustainability initiatives to streamline and enhance the EU’s business environment by reducing administrative burdens faced by companies and boost EU competitiveness through a more efficient regulatory landscape. 

The proposal, which includes several instruments such as draft Directives, draft Delegated Acts, and draft Regulations was published on 26 February 2025. 

This newsflash will focus on the envisaged amendments to the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy Regulation, highlighting the main proposed changes of these far-reaching legislative initiatives.

It is important to note that the Omnibus Sustainability Package is still in the legislative process and subject to further changes. The European Parliament and the Council may still introduce modifications before final adoption. Businesses and stakeholders should continue monitoring developments to ensure compliance with the final version of the Directive. Until the proposal is formally adopted and transposed into national law, existing CSRD, CSDDD, and Taxonomy Regulation requirements remain in force.

Corporate Sustainability Reporting Directive (CSRD)

Reduced scope of application

Omnibus I intends to significantly narrow the scale of companies required to report under the CSRD, with only companies exceeding 1,000 employees on average, and either a turnover above EUR 50M or a balance sheet above EUR 25M remaining in scope. As a result of the proposed changes, SMEs would no longer be in-scope of the CSRD.

In addition, the scope for third-country undertakings is proposed to be reduced to those with a EUR 450M net turnover generated in the EU (instead of EUR 150M), and either a branch with at least EUR 50M turnover (instead of EUR 40M), or a large subsidiary in the EU.

In doing so, Omnibus I aims to reduce the number of undertakings subject to mandatory sustainability reporting requirements by about 80%. 

Companies under the threshold will not be required to provide additional sustainability data beyond the voluntary reporting standards, except for additional sustainability information that is commonly shared between undertakings in the sectors concerned. Omnibus I further determines that assurance providers must also respect this obligation.

Application deadline

While most of the proposed changes are encapsulated in the first of the two draft directives, the Commission has also issued a second 'fast-track' draft Directive (which also covers the CSDDD) to defer the application of the CSRD for those companies that remain in scope, but have not yet reported, granting them two additional years (until 2028) to comply with the reporting obligations.

To prevent companies that were taken out of scope from being required to publish a sustainability report on 1 January 2026, this second draft Directive will go through a fast-track procedure and provides that Member States have until 31 December 2025 to transpose it into national law.

Removal of sector-specific standards

Where sector-specific standards – imposing additional European Sustainability Reporting Standards (ESRS) on specific sectors – were initially set to be published by 30 June 2026, these sector-specific standards have been removed in Omnibus I.

Assurance requirements

Currently, only limited assurance of sustainability reporting is mandatory, meaning that companies are only required to obtain moderate evaluation of their sustainability report. By 2028, the Commission would be able to propose a transition from this limited assurance to a ‘reasonable’ assurance, requiring a broader and more in-depth scope than limited assurance. Reasonable assurance would provide a higher level of confidence regarding the sustainability information but would also cause a higher degree of administrative burden on companies.

In Omnibus I, the possibility for the Commission to propose moving to the reasonable assurance requirement has been removed. 

Revision of the ESRS

Although not directly included in the draft Directives, the Commission has indicated its intention to revise the delegated act establishing the ESRS in view of substantially reducing the amount of data points. The Commission intends to do so by (i) removing those data points deemed least important for sustainability reporting; (ii) prioritising quantitative data over narrative text; and (iii) further distinguishing between mandatory and voluntary data points. 

Furthermore, the Commission aims to clarify provisions deemed unclear and improve consistency with other pieces of legislation.

Double materiality requirement remains

The draft Directives do not affect the ‘double materiality’ principle which is applied in sustainability reporting under the CSRD.

Corporate Sustainability Due Diligence Directive (CSDDD)

Delay of transposition deadline and first wave of application

Omnibus I delays, by one year, the transposition deadline of the CSDDD, i.e. to 26 July 2027, and the first wave of application to 26 July 2028, aiming to provide in-scope companies with more time to prepare for the entry into application of their requirements under the CSDDD.

Primary due diligence limited to ‘Tier 1 suppliers’

According to Article 5 of the current CSDDD, companies must conduct risk-based human rights and environmental due diligence throughout their entire supply chain, including direct and indirect business partners. Omnibus I aims to limit the required due diligence to the company’s own operations, those of its subsidiaries and those of its direct business partners (Tier 1), excluding indirect business partners. Only when companies have plausible information that suggests adverse impact would they need to look beyond their direct business relationships.

In addition, Omnibus I also removes the duty of companies to terminate business relationships as a last resort, in cases where adverse impacts cannot be prevented or mitigated. The possibility to suspend partnerships under certain circumstances remains.

Furthermore, to limit the trickle-down effect on companies with fewer than 500 employees (SMEs and small midcaps), the amount of information that may be requested as part of the value chain mapping by large companies would be limited to the information specified in the CSRD voluntary sustainability reporting standards (VSME standard), unless additional information is absolutely necessary.

Extension of maximum harmonisation to more CSDDD provisions

To ensure that Member States do not go beyond what is required in the CSDDD, Omnibus I aims to extend the full harmonisation provisions of Article 4 to a broader list of due diligence requirements.

Concretely, this means that Member States will not be able to implement more stringent due diligence requirements in their national transposition regarding these provisions. Member States will however still be able to introduce more stringent requirements outside of these listed provisions. 

Reduced penalty regime

The current CSDDD includes a provision for financial penalties, specifying that the maximum fine imposed on a company cannot be lower than 5% of its net worldwide turnover. However, Omnibus I removes this mandatory minimum fine threshold. Instead, it allows national authorities to determine fines on a case-by-case basis, considering specific circumstances rather than adhering to a fixed minimum percentage.

Reduced frequency of monitoring obligations

Omnibus I also plans to reduce the frequency of conducting periodic assessments of companies’ due diligence measures. Instead of the currently required annual monitoring frequency, a 5-year monitoring frequency is proposed.

Deferring civil liability to national regimes

In Omnibus I, the EU-wide rules on civil liability, currently included in Article 29 of the CSDDD, have been removed, aiming to ensure respect for existing national liability regimes. The proposal keeps, however, the requirements for an effective access to justice, including the right to full compensation in case a company is held liable for a failure to comply with the due diligence requirements under the CSDDD.

Removal of requirement to ‘put into effect’ the transition plan

Article 22 of the CSDDD currently requires companies to adopt and put into effect a transition plan. To better align this transition plan with the CSRD, Omnibus I has replaced this provision with a clarification that the obligation to adopt a transition plan includes outlining planned and implemented actions.

Narrowed scope of stakeholder engagement

Finally, Omnibus I proposes to narrow down the scope of stakeholder engagement under the CSDDD by limiting the definition of stakeholder to workers, their representatives and individuals and communities directly affected by the company’s operations. In doing so, general advocacy groups, NGOs and indirectly affected communities are removed from the definition of stakeholders. Furthermore, the proposal foresees that stakeholder engagement will only be required for selected aspects of the due diligence process.

EU Taxonomy Regulation

Optional taxonomy disclosures for mid-sized companies

Omnibus I introduces an ‘opt-in’ regime, where large undertakings with more than 1,000 employees, with a net turnover not exceeding EUR 450M, claiming that their activities are (partially) aligned with the EU Taxonomy, must disclose their turnover and CapEx KPIs, and may choose to disclose their OpEx KPI. Following this ‘opt-in’ approach, companies within these thresholds which do not claim that their activities are (partially) aligned with the EU Taxonomy will not be subject to the reporting requirements.

Permission for ‘partial’ alignment

To provide more flexibility to companies, and to foster a more gradual environmental transition of activities over time, Omnibus I would allow undertakings to report on activities that meet certain Taxonomy technical screening criteria, without meeting all of them. This would allow companies that have made progress towards their sustainability targets but only meet certain EU Taxonomy requirements to demonstrate their already existing efforts and progress towards full alignment.

Next steps

The European Commission's proposal must be negotiated in trilogues between the Council of the EU and the European Parliament, where both can propose amendments. The Commission urges prioritisation of the CSRD disclosure postponement and the CSDDD transposition deadline. However, negotiations are expected to be challenging, with some Member States and political groups advocating further simplification while others push to maintain the status quo.

While there is pressure to swiftly agree on CSRD and CSDDD timelines, the broader package is expected to take up to 9 to 12 months to finalise. 

Transposition should occur within 12 months after finalisation, with new timeline changes expected to be transposed by the end of 2025.