On 8 November 2024, European Commission President Ursula von der Leyen announced plans to introduce an initiative aimed at ‘reducing bureaucracy and the regulatory burden’ associated with sustainability reporting. Following this, the Omnibus Package was published on 26 February 2025. In EU law, an ‘Omnibus’ proposal serves to revise and harmonise existing rules across different areas.
The Omnibus Package will focus on sustainability-related legislation, with two key objectives:
- reducing the administrative burdens associated with existing sustainability regulations; and
- aligning and streamlining overlapping corporate sustainability reporting requirements.
Three key sustainability laws are affected by the Omnibus Package:
- The EU Supply Chain Directive (the “CSDDD”);
- The Corporate Sustainability Reporting Directive (the “CSRD”); and
- The EU Taxonomy Regulation.
Specifically, the Omnibus Package is divided into two parts:
Omnibus I
- Proposal for a Directive of the European Parliament and of the Council amending Directives (EU) 2022/2464 and (EU) 2024/1760 as regards the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements
- Proposal for a Directive of the European Parliament and of the Council amending Directives 2006/43/EC, 2013/34/EU, (EU) 2022/2464 and (EU) 2024/1760 as regards certain corporate sustainability reporting and due diligence requirements;
- Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) 2023/956 as regards simplifying and strengthening the carbon border adjustment mechanism, including an accompanying Staff Working Document.
Omnibus II
Proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) 2015/1017, (EU) 2021/523, (EU) 2021/695 and (EU) 2021/1153 as regards increasing the efficiency of the EU guarantee under Regulation (EU) 2021/523 and simplifying reporting requirements.
Q&As
Questions and answers on simplification omnibus I and II.
A Call for Evidence
This is a proposal to amend three EU Taxonomy Delegated Acts: the Taxonomy Disclosures Delegated Act, the Taxonomy Climate Delegated Act and the Taxonomy Environmental Delegated Act.
KEY PROPOSED AMENDMENTS
The CSRD
Background
The CSRD, which entered into force on 5 January 2023, requires undertakings in scope to report sustainability information according to mandatory European Sustainability Reporting Standards (“ESRS”) and requires the Commission to adopt such standards through delegated acts. So far, the Commission has adopted an initial set of ESRS that apply across all sectors, regardless of their industry. The CSRD also requires the Commission to introduce sector-specific reporting standards, with the first set expected to be adopted by June 2026.
In-scope entities must publish their sustainability information together with the opinion of a statutory auditor.
The CSRD currently applies to large undertakings, small and medium-sized enterprises (“SMEs”) with securities listed on the EU regulated markets, parent undertakings of large groups, as well as to issuers that belong to these categories of undertakings. The entry into application of the reporting requirements introduced by the CSRD is phased in according to different categories of undertakings:
- Phase 1: Large public interest entities with more than 500 employees must report for the first time this year for the financial year 2024;
- Phase 2: The other large undertakings must report in 2026 for the financial year 2025;
- Phase 3: SMEs with securities listed in EU regulated markets must report in 2027 for the financial year 2026 (with the option to opt out of reporting for financial years 2026 and 2027);
- Phase 4: Certain non-EU undertakings that have business in the EU above certain thresholds must report in 2029 for the financial year 2028.
Proposed changes
This Omnibus Package aims to reduce the reporting burden under the CSRD and to limit the ‘trickle down’ of obligations on smaller companies. The framework would be simplified in the following ways:
- Scope: The scope of mandatory sustainability reporting would be significantly reduced, excluding large entities with up to 1,000 employees and all listed SMEs. Reporting requirements would apply only to large entities with more than 1,000 employees that also meet either a turnover threshold of over 50 million euros or a balance sheet total exceeding 25 million euros. This revision aligns the CSRD more closely with the CSDDD (discussed further below).
- ESRS: The Commission intends to prioritise the adoption of a delegated act revising the first set of ESRS, which will prioritize quantitative data, simplify the framework, and clarify mandatory versus voluntary datapoints. It has stated that the changes would enhance consistency with other EU legislation. The Commission has also stated that it will provide clearer guidance on applying the materiality principle, ensuring that entities only report material information and reducing the risk that assurance providers encourage unnecessary reporting or excessive resources being spent on the materiality assessment. It will also simplify the structure and presentation of the standards.
Furthermore, sector-specific ESRS would no longer be introduced, minimising the number of prescribed data points that entities must report.
- Value-chain reporting: The CSRD currently limits value-chain reporting requirements, ensuring companies do not need to gather information from SMEs that exceeds what SMEs must disclose. Under the Omnibus Package, this cap would be expanded to apply directly to all entities with up to 1,000 employees, not just SMEs. The cap would be defined by a voluntary standard based on the Voluntary Standard for Small and Medium-sized Enterprises (VSME) developed by EFRAG.
- Voluntary reporting: For entities not subject to mandatory sustainability reporting requirements, the Commission proposes a proportionate voluntary reporting standard based on the VSME standard developed by EFRAG. This voluntary standard would be adopted by the Commission as a delegated act. In the interim, to address market demand, the Commission plans to issue a recommendation on voluntary sustainability reporting, also based on the VSME standard.
- Postponement: The Omnibus Package would also delay the implementation of reporting requirements for entities in Phase 2 and Phase 3 by two years. The delay aims to prevent these entities from incurring unnecessary costs by starting to report for the financial years 2025 or 2026, only to have the requirement later removed.
- Assurance: The CSRD requires limited assurance for sustainability disclosures, which means that the auditor provides a lower level of assurance compared to reasonable assurance. Limited assurance indicates that the auditor has performed procedures to assess the information but does not provide the same level of confidence as reasonable assurance. Importantly, the CSRD, as it currently stands, provides that in the future, reasonable assurance could become a requirement under certain conditions. Under the Omnibus Package, this possibility would be removed. According to the Commission, the aim is to provide clarity that there will be no future increase in costs of assurance for in-scope entities.
The Omnibus Package introduces a derogation from Article 8 of the Taxonomy Regulation. Large companies will have the option to opt out of Taxonomy disclosures if they do not claim that their activities are Taxonomy-aligned. They will also have more flexibility in reporting partial Taxonomy alignment, even if they do not meet all the Taxonomy’s criteria.
EU Supply Chain Due Diligence – CSDDD
Background
The CSDDD was adopted on 13 June 2024. Its objective is to contribute to the EU’s transition towards a sustainable and climate-neutral economy as outlined in the European Green Deal. It requires companies to identify and address adverse human rights and environmental impacts in their own operations, those of their subsidiaries and their chains of activities.
Member States are required to transpose the CSDDD by 26 July 2026 and its entry into force is phased in according to different categories of undertakings:
- Phase 1 (July 2027): The CSDDD will apply to the largest EU companies, specifically those with more than 5,000 employees and a net annual turnover exceeding EUR 1.5 billion, as well as non-EU companies generating more than EUR 1.5 billion in net turnover in the EU.
- Phase 2 (July 2028): EU companies with over 3,000 employees and a net turnover above EUR 900 million, along with non-EU companies meeting these thresholds in the EU, will need to comply.
- Phase 3 (July 2029): All other companies falling under the general scope, including an estimated 6,000 large EU companies and approximately 900 non-EU companies.
Proposed changes
- Postponement: The Omnibus Package proposes a one-year delay to Phase 1 to give the undertakings included in this phase additional time to prepare for their obligations under the amended CSDDD.
- Climate transition plans: Undertakings are no longer required to implement a transition plan, ensuring alignment with the shift to limiting global warming to 1.5 °C, in accordance with the Paris Agreement.
- Full value chain due diligence: obligations to perform due diligence with respect to indirect business partners in the chain of activities apply only to cases of circumvention or when there is information pointing to likely or actual adverse impacts.
- Periodic monitoring: The frequency of periodic monitoring for due diligence will be reduced from annually to every five years.
- Liability and penalties: CSDDD introduced civil liability for companies that fail to meet their due diligence obligations, as well as pecuniary penalties. The minimum cap for pecuniary penalties (5% of turnover) would now be removed, as would the EU-wide civil liability regime – this would be left to Member States’ national legal systems.
- Termination of business relationships: The obligation to terminate business relationships as a last resort when they are unable to address or mitigate significant sustainability-related risks will be removed. The requirement to suspend such relationships will remain.
The Taxonomy Regulation
The Omnibus Package aims to simplify and reduce the cost of the Taxonomy Delegated Acts. The Commission proposes fewer reporting data points and exempts companies from assessing the Taxonomy alignment of financially immaterial activities. Additionally, it is consulting on two approaches to simplify the Do No Significant Harm (DNSH) criteria for chemicals. which currently apply across all economic sectors under the EU Taxonomy.
What are the implications for funds?
Investment funds themselves are not directly in scope of the CSRD or CSDDD. Nonetheless, we expect that – if adopted – the amendments will create certain challenges for investment funds. While the Commission has estimated the combined cost savings resulting from the proposed CSRD changes to amount to EUR 4.4 billion per year, in practice this means a significant reduction of undertakings in the scope of the CSRD (approximately 80%).
In turn, if investee companies provide less detailed or less frequent sustainability disclosures, investment funds and data providers may be forced to rely on estimated data. This applies in particular to funds whose strategies focus on SMEs.
The topic of estimates has been addressed by the European Authorities in the context of Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services sector (“SFDR”) and the Taxonomy Regulation. In particular, it should be noted that:
- Estimates are permitted under the Taxonomy Regulation when relevant data is not available, particularly for third-country investee companies, but cannot be used to assess compliance with the Do No Significant Harm (DNSH) criteria.
- Under SFDR, estimates may be used to measure for Principal Adverse Impact (PAI) indicators where data is unavailable, but financial market participants must disclose how the estimates were derived.
Investment funds with Taxonomy-alignment as part of their strategies may also face challenges, as fewer investee companies would be required to disclose Taxonomy-aligned revenues, CapEx, and OpEx. As a result, the minimum Taxonomy-alignment targets for such funds may need to be revised.
Next Steps
The legislative proposals will now be submitted to the European Parliament and the Council for their consideration and adoption. The Commission has urged the co-legislators to treat the Omnibus package with priority, in particular the proposal postponing certain disclosure requirements under the CSRD and the transposition deadline under CSDDD, as they aim to address key concerns identified by stakeholders.
The changes will enter into force once the co-legislators have reached an agreement on the proposals and after publication in the EU Official Journal.
The draft Delegated Act amending the current delegated acts under the Taxonomy Regulation will be adopted after public feedback (open until 26 March 2025) and will apply at the end of the scrutiny period by the European Parliament and the Council.
Should you need any further clarification on the specific proposals or potential impacts, please feel free to reach out to our ESG specialist legal team.
