EU Omnibus Regulation: What simplifications can be expected for sustainability reporting?
February 25, 2025 · News
EU Omnibus Regulation: What simplifications are planned?
Update 27/02/2025
The first two so-called Omnibus packages of simplification measures have been presented by the European Commission on 26 February 2025. As expected, the proposed measures focus on sustainability reporting obligations for the largest companies. The thresholds are being raised, allowing some companies to be exempt from reporting requirements. In addition, the reporting obligations will be shortened, and the reporting date for the second and third waves will be postponed by two years to ensure that smaller companies are not burdened by these obligations.
Note that the proposals will be submitted to the European Parliament and the Council for their consideration and adoption.
What are the proposed changes?
- A proposal which postpones the application of all reporting requirements in the CSRD for companies that are due to report in 2026 and 2027 (so-called wave 2 and 3 companies) and which postpones the transposition deadline and the first wave of application of the CSDDD by one year to 2028.
- A draft Delegated act amending the Taxonomy Disclosures and the Taxonomy Climate and Environmental Delegated Acts subject to public consultation.
- A proposal for a Regulation amending the Carbon Border Adjustment Mechanism Regulation.
- A proposal for a Regulation amending the InvestEU Regulation.
What are the main changes proposed concerning the CSRD?
- Reduction of the scope of reporting companies: The reporting requirements would only apply to large companies with more than 1000 employees (i.e. organizations that have more than 1000 employees and either a turnover above EUR 50 million or a balance sheet total above EUR 25 million).
- ‘Value chain cap’: For companies that will not be in the scope of the CSRD anymore (up to 1,000 employees), the Commission will adopt by delegated act a voluntary reporting standard based on the standard for SMEs (VSME) developed by EFRAG. That standard will act as a shield by limiting the information that companies or banks falling into the scope of the CSRD can request from companies in their value chains with fewer than 1,000 employees.
- Revision of the European Sustainability Reporting Standards (“ESRS”): aim of substantially reducing the number of data points, clarifying provisions deemed unclear and improving consistency with other pieces of legislation.
- Postponement of reporting requirements: it is proposed to postpone by two years (until 2028) the entry into application of the reporting requirements for large companies that have not yet started implementing the CSRD and for listed SMEs (Wave 2 and 3).
What was expected
The EU Commission is currently working on a comprehensive “omnibus package”, announced as a Flagship Action enabler within of the Competitive Compass for EU, to cover a significant simplification in the fields of sustainable finance reporting, sustainability due diligence and taxonomy. The Commission plans to present a first package on February 26. According to current information, the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy would be particularly affected. All three initiatives are key pillars in the transformation of the European economy towards greater sustainability.
The announcement of simplification follows years of criticism from some business actors that these obligations are too burdensome and that the resulting burden on business is too great, while the added value is comparatively small. The political change in the U.S., the collapse of the grand coalition in Germany and the poor economic situation have intensified these discussions. In November of last year, EU Commission President Ursula von der Leyen announced the Omnibus Package. The aim is to consolidate and simplify the reporting for companies arising notably from the CSRD, CSDDD and the EU taxonomy.
The exact details of the EU Commission’s proposals remain unclear at this time. However, several points introduced in the Competitive Compass for the EU (see here) can give an idea of what it could contain:
- The EU Commission has announced plans to reduce reporting “burdens” for large companies by 25 percent and for small and medium-sized enterprises (SMEs) by 35 percent.
- In general, obligations would be proportionate to the size of different companies’ activities
- A new category for companies should be created: “small mid-caps,” which will receive specific relief measures. To ensure proportionate regulation adapted to companies’ size, a new definition of small mid-caps will soon be proposed. By creating such a new category of company, bigger than SMEs but smaller than large companies, says European Commission, thousands of companies in the EU will benefit from tailored regulatory simplification in the same spirit as SMEs. The Commission is also preparing a simplification of the Carbon Border Adjustment Mechanism for smaller market players.
- In addition, requirements should be more closely aligned with the needs of investors.
- A “trickle-down effect” should be avoided, so that smaller companies along the supply chain are not subject to excessive, unintended reporting.
For the CSRD, which has already been in effect for the first set of companies for the fiscal year 2024, the potentially over 1,000 data points required by the CSRD could be reduced to essential information.
Furthermore, there would be discussions, supported by some Member States, about suspending the CSRD entirely for one or two years. Whether this would affect all companies or if the CSRD would remain in place for companies already subject to it remains unclear.
Beyond the first package, the Commission has also announced a series of additional simplifications. According to this, the first Omnibus package is merely part of an “unprecedented simplification effort.”
“The Green Deal is the expression of an ambition for European leadership. The operating methods differ, but other major economies have introduced measures to support the transition. In 2025, it will be difficult for the United States to do without the hundreds of millions of dollars in subsidies injected into the economy by the IRA (Inflation Reduction Act), and China could reach its oil peak this year.
Whatever happens in terms of regulatory framework, CSR will increasingly become a lever to help companies cope with geopolitical upheavals. The imperatives of security of supply (raw materials, water, energy, etc.) will encourage companies to increase their efficiency, frugality and recycling measures, all of which are part of sustainable transformation. In a complex and unstable world, it will be even more important for them to “stay the course” because “stop and go” is costly.
Companies that have understood these issues will continue their efforts with consistency and confidence, moving from reporting to action, from strategy to impact. They will extend their lead and win in the long term.”