What Does the EU Omnibus Proposal Mean for Sustainability?

The European Commission has released its omnibus package of simplification proposals, aiming to boost competitiveness through changes to the CSRD, EU Taxonomy, CBAM and CSDDD.

It says that if the package is adopted and implemented as it has set out, the proposals are estimated to bring savings of around €6.3bn (US$6.6bn) and mobilise investment capacity of €50bn (US$52bn). 

The changes will remove around 80% of companies from the scope of CSRD and postpone its reporting requirements alongside limiting the EU Taxonomy to the same scope of the CSDDD. 

Ursula von der Leyen, President of the European Commission, says: “Simplification promised, simplification delivered! 

“We are presenting our first proposal for far-reaching simplification. EU companies will benefit from streamlined rules on sustainable finance reporting, sustainability due diligence and taxonomy. 

“This will make life easier for our businesses while ensuring we stay firmly on course toward our decarbonisation goals.

"And more simplification is on the way.”

How could these changes impact the EU?

The European Commission says that its proposed changes could increase the EU’s investment capacity through the use of returns from past investments and optimised use of funds still available under the legacy instruments. 

It expects that this package would mobilise around €50bn (US$52bn) in additional private and public investments. 

It also hopes to make it easier for EU Member States to contribute to the programme and simplify administrative requirements for implementing partners, financial intermediaries and final recipients.

Stéphane Séjourné, Executive Vice-President for Prosperity and Industrial Strategy at the European Commission, says: “We are taking concrete steps to cut red tape and make EU rules more accessible and effective for citizens and businesses.

“Today’s package is the first step of our far-reaching simplification efforts across all sectors of legislation. 

“We can show that Europe is not only an incredible market to invest, produce, sell and consume but also a simple market.”

Reactions to the omnibus proposal

Lilianna Krawczyk, a Senior Consultant at EY, said on LinkedIn: “The new changes, along with the lack of CSRD implementation in many Member States, may be particularly problematic for large subsidiaries from countries that have already adopted CSRD. 

“Will these entities need to prepare separate reports because their parent companies delay investments in consolidated reporting?”

Bindu Sukumarapillai, CEO of the Fairtrade Network of Asia Pacific Producers, says: "A CSDDD without civil liability and reduced fines for wrongdoings leaves farmers and their families with little. Companies often disengage and switch suppliers rather than co-invest in solutions that build resilience within supply chains.

"Meanwhile, meaningful stakeholder engagement is further limited, reinforcing power imbalance. What does this leave for farmers?"

Robin Hodess, CEO at GRI, says: "If the Commission aims to make European business more competitive then cutting the ambition of the CSRD is a backward step, given the crucial importance of sustainability data in driving innovation and investment into Europe. It also raises serious questions about how to achieve a climate-neutral EU, as the cornerstone of the Green Deal."

Parts of the full proposal were leaked, and the official release has confirmed the information the leak contained. 

Andreas Rasche, Professor and Associate Dean at Copenhagen Business School, discussed the leaked documents on LinkedIn, saying: “This is very disappointing and not at all proportionate. The document gives no evidence-based reasons for the changes, and the process up to this point was neither transparent nor inclusive. 

“The EU has started to dismantle key Green Deal regulations that it spent much time on during the last five years. 

“Yes, simplifications are needed and there are ways to make such simplifications, but what is suggested in this document does not simplify. It deregulates.”

What happens next?

These proposals will be submitted to the European Parliament and Council for debate.

Changes to the CSRD, CSDDD and CBAM will enter force once co-legislators have reached an agreement on the proposal and after publication in the EU Official Journal. 

The commission is asking co-legislators to treat this package with priority, particularly sections postponing disclosure requirements under the CSRD and transposition under the CSDDD.

Proposed changes to the CSRD

• Remove around 80% of companies from the scope of CSRD.
• Prevent sustainability reporting requirements on large companies from burdening smaller companies in their value chains.
• Postpone reporting requirements until 2028 for companies in the scope of CSRD required to report as of 2026 or 2027.

Proposed changes to the EU Taxonomy

• Limit EU Taxonomy reporting obligations to the largest companies, allowing voluntary reporting for other large companies in the future scope of the CSRD.
• Introduce an option to report on activities partially aligned with the EU Taxonomy.
• Introduce a financial materiality threshold for reporting and reduce reporting templates by around 70%.
• Simplify complex DNSH criteria for pollution prevention and control related to the use and presence of chemicals.
• Adjust the Green Asset Ratio for banks, allowing them to exclude exposures outside of the future scope of the CSRD.

Proposed changes to the CSDDD

• Simplify due diligence requirements by focussing systematic requirements on direct business partners.
• Reducing the frequency of periodic assessments from annual to five years.
• Limiting the amount of information that may be requested from SMEs and SMCs.
• Remove EU civil liability conditions and protect companies against over-compensation.
• Postponing the application of sustainability due diligence requirements for largest companies by one year.
• Advancing the adoption of guidelines to July 2026. 

Proposed changes to the CBAM

• Exempt small importers from CBAM obligations through a new cumulative annual threshold of 50 tonnes per importer, elimination obligations for 90% of importers.
• Simplify rules for companies that remain in scope on authorisation of CBAM declarants and rules related to obligations including the calculation of embedded emissions and reporting requirements.
• Strengthen rules to avoid circumvention and abuse.

Wopke Hoekstra, Commissioner for Climate, Net Zero and Clean Growth at the European Commission, says: “Today, we’re making it simpler to do business in Europe. 

“By simplifying the Carbon Border Adjustment Mechanism (CBAM), we're empowering companies to reduce their carbon footprint without compromising their competitive edge. 

“While exempting around 90% of companies from CBAM reporting, we still ensure the capture of over 99% of emissions. This marks the first step in a broader CBAM review.

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