EU's Omnibus Package: Simplifying Sustainability Reporting and Administrative Burdens

On February 26, the European Commission (Commission) unveiled an Omnibus Package, proposing significant changes to the EU’s Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the EU Taxonomy, EU Carbon Border Adjustment Mechanism (CBAM), and other Green Deal regulations. If adopted by the European Parliament and Council, these changes will simplify reporting obligations and reduce administrative burdens for many companies. As previously discussed, EU Taxonomy simplification is expected to significantly impact disclosures and sustainable investment strategies.

This article details key proposals in the Omnibus Package and the potential impact on CSRD, CSDDD, the EU Taxonomy, and reporting frameworks.

Key Highlights of the Omnibus Package’s Proposals

• Reduces the number of companies subject to the CSRD by approximately 80%.
• Postpones of CSRD reporting requirements for large EU undertakings and listed small and midsize enterprises (SMEs) to 2028 (instead of 2026 and 2027, respectively).
• Delays compliance deadline for the first wave of companies under the CSDDD to 2028 (instead of 2027).
• Retains “double materiality” assessment requirement under the CSRD, which evaluates both the financial impact of environmental and social risks on a business and the business’s impact on people and the environment.

EU Competitive Compass

The Commission formalized this Omnibus Package after reviewing EU regulations that could impede EU markets’ competitiveness and resiliency. The Omnibus Package, which aims to “simplify EU rules, boost competitiveness, and unlock additional investment capacity,” is part of several broader initiatives in Europe to maintain momentum towards sustainability objectives while ensuring European businesses remain globally competitive. Together with other measures to reduce EU reporting rules, such as considered revisions to the EU Taxonomy, the European Commission seeks to reduce the administrative burdens imposed on businesses by 25%—and by at least 35% for small and medium-sized enterprises (SMEs)—potentially saving businesses around €6.3 billion—by the end of its mandate in 2029.

Proposed Changes to the CSRD

If adopted, the Omnibus Package would modify key provisions of CSRD as follows:

• “Double materiality” expectation. Proposed changes continue to emphasize the need for “double materiality,” requiring companies to assess both financial risks and broader societal and environmental impacts.
• Reduced reporting requirements.
  • Companies required to comply with the CSRD would be significantly reduced.
  • Following changes to scoping definitions, reporting requirements would apply only to large EU undertakings and listed SMEs with more than 1,000 employees and either (i) turnover above €50 million or (ii) a balance sheet total above €25 million. This marks a departure from the current scoping thresholds, which require compliance from companies meeting two of the three following criteria—(a) €50 million net turnover, (b) €25 million balance sheet total, and (c) 250 employees.
  • Non-EU parent companies will only be subject to the CSRD if they generate at least €450 million in EU-derived turnover (for two consecutive financial years) and either have an EU large undertaking meeting the revised thresholds or an EU branch with turnover exceeding €50 million (previously €40 million).
• Voluntary reporting standards.
  • The Commission will adopt a voluntary reporting standard for SMEs (VSME), based on the VSME standard developed by the European Financial Reporting Advisory Group (EFRAG), to provide avenues for voluntary reporting by undertakings not subject to mandatory reporting requirements.
  • The Commission’s adopted VSME will limit the information that in-scope companies need to request from out-of-scope companies or banks to meet their compliance obligations, reducing compliance burdens imposed on upstream value chains.
• Value-chain reporting cap.
  • The value-chain cap for reporting will be extended and strengthened to apply directly to the reporting company, resulting in all undertakings with up to 1000 employees being protected from excessive information requests.
• Assurance requirements.
  • CSRD reporting will remain subject to a limited assurance. However, instead of adopting detailed standards for sustainability reporting assurance, the Commission will issue targeted assurance guidelines by 2026.
  • Assurance requirements will be tailored to minimize administrative burden while also ensuring the effectiveness of reported information.
• Sector-specific reporting standards.
  • The Commission will no longer be required to adopt sector-specific sustainability reporting standards.
• Optional Taxonomy reporting.
  • An "opt-in" procedure/participation for Taxonomy reporting will be introduced for large undertakings with more than 1000 employees and a net turnover not exceeding EUR 450 million. 
  • Companies that choose to opt-in can disclose their turnover and choose to disclose their turnover and capital expenditure key performance indicators (KPIs) and opt out of disclosing their operational expenditure KPI.
• Postponement of reporting requirements.
  • Two-year postponement of reporting requirements for the second (large undertakings that are not public interest entities and have more than 500 employees) and third wave (listed SMEs, small and non-complex credit institutions, and captive insurance and reinsurance undertakings) of covered entities.
  • Large EU undertakings and SMEs that remain in scope will not be required to report until 2028.
  • The postponement is structured for undertakings to avoid unnecessary and avoidable costs otherwise required to report for financial year 2025 or 2026.

Proposed Changes to the CSDDD

If adopted, the Omnibus Package would modify key provisions of the CSDDD as follows:

• Compliance postponement. The compliance deadline for the first wave of companies will be pushed back from July 26, 2027, to July 26, 2028.
• Streamlined requirements for adverse impact assessments. Companies will only be required to assess adverse impacts of direct business partners. Indirect partner assessment will only be required for companies with plausible evidence of potential adverse impacts.
• Simplified due diligence requirements.
  • The frequency of periodic due diligence assessments will be extended from one year to five years, with assessments required only when reasonable evidence suggests that measures are no longer adequate or effective.
  • Stakeholder engagement obligations will be streamlined, and companies will no longer be required to terminate business relationships as a last resort.
• Reduced reporting obligations for out-of-scope companies. Companies outside the CSDDD’s scope will only need to provide information aligned with CSRD voluntary reporting standards unless additional information is required to fulfill mapping requirements.
• Aligned transition plan requirements.
  • In scope companies will still need to adopt a transition plan for climate change mitigation, with alignment to the Paris Agreement, efforts to support transition to a sustainable economy, and goal of limiting global warming to 1.5°C.
  • CSDDD climate transition plans and due diligence requirements will be harmonized with CSRD requirements.
• Modified penalty and liability frameworks.
  • Proposes removing the requirement for pecuniary penalties based on a company’s net worldwide turnover. Instead, the Commission, in collaboration with member states, will issue guidelines allowing supervisory authorities to determine penalties at national and local levels.
  • The CSDDD’s EU-wide liability regime will be removed. However, member states will still be required to ensure that victims of adverse impacts have effective access to justice and the right to full compensation.

Proposed Changes to the European Sustainability Reporting Standards (ESRS)

If adopted, the Omnibus Package would modify the ESRS as follows:

• Revisions to the first set of ESRS. The Commission intends to adopt a delegated act, which would substantially reduce the number of mandatory ESRS data points, including removal of all data points that are deemed the least important, prioritize quantitative data points over narratives, and further
• Clarified requirements. The revisions to the ESRS will clarify provisions deemed unclear, improve consistency with other pieces of EU legislation, and provide improved instructions on how to apply the materiality principle.
• Interoperability with global standards. ESRS revisions will focus on interoperability with global sustainability reporting standards, ensuring the ESRS remains aligned with other international frameworks.

Proposed Changes to the EU Taxonomy

The Omnibus Package introduces notable amendments to the EU Taxonomy, including:

• New financial materiality threshold. Only companies subject to the CSRD with net turnover exceeding €450 million will be required to report to the EU Taxonomy, with smaller companies allowed to report voluntarily.
• Option to report on partially aligned activities. Companies that have made progress toward sustainability targets may voluntarily disclose their progress. This approach is expected to reduce compliance costs and administrative burdens.
• Alignment with the CSRD and other EU legislation. Proposed changes to the EU Taxonomy align with proposed amendments to the CSRD, CSDDD, and other EU legislation, resulting in reduced and simplified reporting requirements and improved consistency in reporting.

Omnibus Package Under Consideration

The European Parliament and the European Council will consider whether to adopt the Omnibus Package as a whole and implement proposed revisions in upcoming parliamentary sessions. If approved, the changes to the CSRD and CSDDD will take effect following their publication in the EU Official Journal.

While the Omnibus Package and proposed changes to CSRD and CSDDD have drawn criticism from certain European Parliament members, environmental groups, and social advocates, they offer much-needed relief to many companies struggling to comply with stringent and complex EU sustainability reporting regulations. The proposed changes will also eliminate potentially redundant or overly complex reporting requirements and clarify reporting expectations, resulting in improved exchange of information on key sustainability metrics.

How should companies prepare for CRSD and CSDDD changes?

As the Omnibus Package has not been adopted yet, companies in the scope of CSRD, CSDDD, and the EU Taxonomy should be on the lookout for updates from the European Parliament and European Council. US companies currently in scope for CSRD and CSDDD requirements should also continue preparing for the new regulatory requirements by identifying program, policy, or standard operating procedure changes needed to meet the new reporting standards. Some areas requiring new or changed activities may include corporate governance for climate risk management and supply chain due diligence; procedures for data collection, management, and reporting; risk assessment, management, and mitigation; and stakeholder engagement. While potentially exceeding proposed compliance requirements, continuing to prepare for CSRD and CSDDD will provide opportunities to enhance operational sustainability efforts and ensure effective communication on sustainability risks and activities. Strategic planning and compliance preparedness now will also ensure a strong foundation for compliance obligations, such as required audits or disclosures.

Technology plays a crucial role in streamlining compliance, as CSRD reporting requires advanced software for data collection, automation, and adherence to standards like ESRS and GRI. The mandated XBRL format poses challenges, but technology partnerships can ease integration.

Nixon Peabody’s ESG Team is dedicated to helping you stay ahead of emerging and evolving ESG reporting and disclosure requirements. We provide guidance on how to navigate current and future regulations, ensuring your business remains compliant and competitive.