Simplification Omnibus Package

On February 26, 2025, the EU Commission presented the first part of the Omnibus Simplification Package announced in January 2025. This formal legislative initiative aims to simplify and harmonise existing EU regulations around sustainability reporting (“Omnibus Package” and “Commission Draft“).

The Omnibus Package is intended to revise

• the Corporate Sustainability Reporting Directive (“CSRD“) (Directive (EU) 2022/2464),
• the Corporate Sustainability Due Diligence Directive (“CSDDD“) (Directive (EU) 2024/1760) and
• the Taxonomy Regulation (Regulation (EU) 2020/852).

The key objective is to reduce sustainability-related reporting obligations by 25%; for small and medium-sized enterprises (“SMEs“), reductions of up to 35% are envisaged. Below we provide you with an initial overview of the key aspects of the Commission’s proposal.

FURTHER INFORMATION

1. Background

The EU Commission sees regulatory obstacles as a significant burden on the competitiveness of the European economy. The complexity, number and duration of administrative processes would make Europe less attractive for investments. The bureaucratic burden is too high, especially for smaller companies. Administrative decisions and access to funding must become faster and cheaper for companies and citizens.

For this reason, the EU Commission announced a series of so-called Omnibus Simplification Packages in a strategy paper dated 29 January 2025 – the “Competitiveness Compass for the EU“. The aim is to strengthen competitiveness and reduce bureaucratic hurdles – through greater efficiency, less regulatory complexity and accelerated administrative processes.

The Omnibus Package that has now been published is the first legislative measure in a series of announced reforms to reduce the burden on companies.

2. Specific Objectives of the Omnibus Package 

The first legislative package should lead to far-reaching simplifications in the areas of sustainability reporting, sustainability due diligence and taxonomy.

The requirements of the regulations are to be better tailored to the needs of investors in line with the objective of the EU’s Sustainable Finance Framework to mobilise private financial flows for a low-carbon, resilient and resource-efficient economy. This includes, for example, the introduction of more proportionate deadlines. In addition, the regulatory obligations should be more proportionate to the scope of the activities of the various companies.

Furthermore, greater consideration of trickle-down effects on smaller companies is planned to prevent them from being exposed to excessive reporting requirements along the value chains in practice.

3. Key Aspects of the Omnibus Package

In particular, the Omnibus Package includes the proposals outlined below.

3.1 CSRD Adjustments: Fewer Affected Companies, Later Application Dates and Revision of Standards

3.1.1 How Does the CSRD Currently Regulate Sustainability Reporting?

The CSRD, which came into force on January 5, 2023, regulates the sustainability reporting requirements for companies. It obliges companies within its scope to disclose comprehensive information on sustainability risks and impacts. The aim is to provide investors and other stakeholders with reliable and comparable data to promote financial stability and create transparency about companies’ sustainability performance.

The CSRD applies to public-interest entities with more than 500 employees for the 2024 financial year. For the 2025 financial year, all companies that fulfil at least two of the following criteria are required to report: More than 250 employees, more than EUR 40 million in turnover or more than EUR 20 million in total assets. From the 2026 financial year, capital market-oriented SMEs (except micro undertakings), small and non-complex credit institutions and captive (re)insurance undertakings will be subject to the CSRD reporting obligation if they exceed at least two of the following three criteria: Balance sheet total of EUR 450,000, sales revenue of EUR 900,000 or more than 10 employees. However, SMEs have an opt-out option until the 2028 financial year.

3.1.2 Proposed Amendments Through the Omnibus Package

Significant changes to the CSRD as a result of the proposed Omnibus Package include a considerable reduction in the number of companies subject to reporting requirements, a postponement of the first-time application dates and simplifications in reporting:

• Significantly fewer companies affected: Under the Commission Draft, only companies with more than 1,000 employees and either a turnover of more than EUR 50 million or a balance sheet total of more than EUR 25 million are affected by the CSRD reporting obligation. Large undertakings with fewer than 1,000 employees are released from the reporting obligation. According to the EU Commission, this change would reduce the number of companies subject to reporting requirements by around 80%, which would make things considerably easier for small and medium-sized undertakings.
• Reporting obligation for non-EU undertakings: Non-EU undertakings shall only be subject to the CSRD reporting obligation if they generate a turnover of more than EUR 450 million (instead of the previous EUR 150 million) in the EU and that have an EU subsidiary classified as large under accounting law or an EU branch with a turnover of more than EUR 50 million (instead of the previous EUR 40 million).
• Voluntary reports: Companies that are no longer subject to mandatory reporting may report in accordance with the voluntary standard for SMEs (Voluntary ESRS for Small and Medium-sized Enterprises – “VSME Standard“) developed by the European Financial Reporting Advisory Group (“EFRAG“). In addition, reporting companies should not be able to go beyond the VSME Standard in their requests for information from companies in the value chain, which should reduce the trickle-down effect. Non-reporting companies can therefore be prepared for data requests from reporting companies based on the VSME Standard. Considering the proposed changes to the reporting obligation, it is expected that the already published draft of the VSME Standard will be revised.
• Postponement of the first-time application dates: For companies that are required to report for the first time for the 2025 financial year (second wave) or 2026 (third wave), the reporting obligation is to be postponed by two years. The postponement of the application dates is intended to prevent certain companies from becoming subject to reporting requirements and subsequently being exempted from this obligation. Such a situation would mean that the companies concerned would incur unnecessary and avoidable costs. This “stop-the-clock” rule would have no impact on companies that are already required to report, nor on non-EU undertakings in the fourth wave.
• Revision of the reporting standards: The reporting standards (European Sustainability Reporting Standards – “ESRS“) are to be revised and simplified. Among other things, the scope of the ESRS is to be significantly reduced by deleting and prioritising data points. In addition, the originally planned sector-specific reporting standards (ESRS Set 2) are to be dispensed with so that the number of prescribed data points that companies must report would not increase.
• Limited assurance audit: The option to move from the limited assurance requirement to the reasonable assurance requirement would be removed. This would provide clarity that the costs of auditing the reports for companies that fall within the scope will not increase in future.

3.2 Changes to the CSDDD: Simplified Due Diligence in the Value Chain and Extended Deadlines

3.2.1 What Does the CSDDD Currently Regulate?

The CSDDD obliges large undertakings to fulfil human rights and environmental due diligence obligations along their value chain. From July 2027, it will apply to companies with more than 5,000 employees and a turnover of EUR 1.5 billion, from July 2028 to those with 3,000 employees and a turnover of EUR 900 million, and finally from July 2029 to all companies with more than 1,000 employees and a turnover of EUR 450 million.

3.2.2 Proposed amendments due to the omnibus package

The Omnibus Package also aims to streamline the CSDDD in order to reduce the burden on companies. The following changes are planned, among others:

• Postponement of the transposition and application deadline: The Commissions Draft would give companies more time to prepare for the implementation of the new framework by extending the transposition deadline by one year (until 26 July 2027) and postponing the first phase of application of the due diligence obligations for the largest companies by one year (to 26 July 2028).
• Reduction of due diligence obligations for indirect suppliers: In future, companies would have to prioritise their direct business partners (Tier 1 suppliers). According to the Commission Draft, an obligation to comprehensively review the entire value chain should only exist if there are indications of specific risks.
• Reducing the frequency of mandatory risk analyses: Companies would now have to update their reports at longer intervals, which would significantly reduce the effort involved.
• No uniform civil liability across the EU: The uniform civil liability at EU level originally envisaged in the CSDDD is to be cancelled. Instead, the Member States will retain national regulatory competence so that they can decide independently whether and to what extent companies are liable for infringements.

3.3 Changes Regarding the Taxonomy: Targeted Adjustments and Limited Scope of Application

3.3.1 What Does the Taxonomy Regulation Currently Regulate?

The Taxonomy Regulation sets out standardised criteria for determining whether an economic activity can be classified as environmentally sustainable. Since 1 January 2022, it has applied to companies that are already subject to the NFRD/CSRD reporting obligations.

3.3.2 Proposed Changes to the EU Taxonomy Through the Omnibus Package

The Omnibus Package contains proposals for amendments to the CSRD regarding taxonomy reporting in derogation of Art. 8 of the Taxonomy Regulation and proposals for draft amendments to the delegated taxonomy act on disclosure requirements and the delegated acts on climate taxonomy and environmental taxonomy, among others:

• Restrictions on the scope of application: Only large undertakings with an average of more than 1,000 employees and a turnover of more than EUR 450 million would be subject to full reporting in accordance with the requirements of the Taxonomy Regulation. This would further restrict the scope of application, which has already been reduced by the proposed CSRD amendment.
• Voluntary taxonomy reporting: The Omnibus Package provides for voluntary taxonomy reporting for companies that will be subject to the CSRD in future (i.e. large companies with more than 1,000 employees) and a turnover of up to EUR 450 million. This reduces the number of companies that are required to report on their taxonomy compliance.

4. Outlook

The EU Commission’s legislative proposals are now going through the regular procedure in the EU Parliament and the EU Council. It remains to be seen whether and to what extent changes will be made. The EU Commission is pushing for swift implementation, however there are already voices that expect delays in the legislative process – particularly with regard to possible conflicts with the sustainability goals of the EU Green Deal. As the postponement of the dates of first-time application is regulated in a separate legislative proposal of the Omnibus Package, this part of the package could go through the legislative process prior to the other proposed amendments.

It is crucial for companies to follow the further course of events closely. In particular, the applicability and timing of the reporting obligations could have a direct impact on compliance and reporting strategies. Delays or adjustments to the regulations could overtake existing implementation plans or result in the need for additional adjustments.