Discover how the Omnibus Simplification Package aims to ease the burden of EU sustainability regulations, streamlining CSRD, CSDDD, EU Taxonomy and CBAM.
The advent of the three major European corporate sustainability regulations, the EU Taxonomy - Corporate Sustainability Reporting Directive - Corporate Due Diligence Directive, and the introduction of the Carbon Border Adjustment Mechanism have come with implications for companies.
The intricate web of KPIs and reporting obligations has often led to criticism of the directives for their complexity and the administrative burden they place on companies, making it difficult to comply with regulatory demands.
In response to these concerns, the European Commission has introduced on February 26th 2025 a proposal for the Omnibus Simplification Package, a legislative initiative aimed at reducing the pressure generated by sustainability reporting and compliance requirements.
But what exactly is the Omnibus Simplification Package and what are its implications for companies?
Let’s find out.
Understanding the Omnibus Simplification Package
The first proposal of the Omnibus Simplification Package has arrived.
The legislative initiative by the European Commission seeks to consolidate and simplify existing sustainability regulations, notably the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the EU Taxonomy Regulation and the Carbon Border Adjustment Mechanism (CBAM).
The primary objective is to reduce the regulatory and reporting burdens on businesses both in terms of scope of application and on contents, thereby enhancing the EU's competitiveness in the global market and in the transition to a more sustainable economy.
The Need for Simplification
The call for the Omnibus Simplification Package stems from mounting concerns over the complexity and overlapping nature of the EU's sustainability regulations.
In September 2024, former Italian Prime Minister Mario Draghi released a report titled "The Future of European Competitiveness" highlighting regulatory barriers as a significant impediment to the EU's economic vitality.
The report underscored that the complexity given by a fragmented sustainability legislation landscape, while characterized by a set of complete and effective regulations, had inadvertently created obstacles for businesses given the high amount of compliance requirements.
This sentiment was echoed by key EU member states with countries such as Germany and France which have been vocal in advocating for a reassessment of the existing regulatory framework.
German Finance Minister Joerg Kukies, in January 2025, called for a two-year postponement of certain CSRD requirements and the elimination of sector-specific reporting mandates.
Similarly, France proposed a "massive regulatory pause" suggesting a comprehensive review and potential revision of current sustainability directives to better align with the evolving international economic landscape.
Key Points of the Omnibus Simplification Package
With the release of the Omnibus Simplification Package, several amendments on the application date, scope and compliance requirements have been proposed:
CSRD: Higher Reporting Thresholds, Fewer Requirements
The Corporate Sustainability Reporting Directive (CSRD) will now apply only to companies with more than 1,000 employees that meet at least one of the following criteria:
- €50 million in revenue
- €25 million in assets
This excludes 80% of previously covered companies, including listed SMEs which will fall under EU Commission’s delegated act of voluntary reporting based on the EFRAG VSME voluntary reporting standard.
The sector-specific ESRS standards are omitted, and, for what concerns audits, reasonable assurance requirements are removed, leaving only limited assurance.
Additionally, reporting deadlines are delayed by two years for companies originally set to comply in 2026 or 2027.
(It is important to remember that companies that have to produce a sustainability report in 2025 concerning the financial year 2024 are still required to fulfil the obligation because they will in any case remain within the scope of CSRD.)
CSDDD: Narrower Scope and Delayed Compliance
The Corporate Sustainability Due Diligence Directive (CSDDD) will limit due diligence obligations to a company’s operations, subsidiaries, and direct business partners, removing lower-tier supply chain responsibilities.
The due diligence process is extended from annual recurrence to every five years, reducing the frequency of required updates.
Additionally, the EU drops harmonized liability rules, leaving enforcement to national laws.
Finally, compliance is postponed to 2028 for firms with 3,000+ employees and more than €900 million in turnover, to 2029 for firms with 1,000+ employees and more than €450 million in turnover and for non-EU firms that generate more than €450M in turnover on European soil.
EU Taxonomy: Reduced Scope and Reporting Burden
The EU Taxonomy Regulation, now under public consultations, which are going to run until March 26th 2025, will now apply only to firms with 1,000+ employees and more than €450 million in revenue, making reporting voluntary for smaller firms.
Companies can choose to disclose partially aligned activities, and 70% of the required data points are eliminated to streamline reporting obligations.
CBAM: Exemptions for Small Importers
A new exemption under the Carbon Border Adjustment Mechanism (CBAM) removes 90% of affected businesses, as companies importing less than 50 tonnes annually of CBAM-covered goods no longer need to comply.
Anyway, the Commission plans a full review by the end of 2025, with potential legislative revisions in early 2026.
Implications for Businesses
The introduction of the Omnibus Simplification Package carries significant implications for businesses operating within the EU:
- Reduced Administrative Burden: By raising the reporting thresholds and streamlining standards, many SMEs will find relief from various reporting duties, allowing them to allocate resources more efficiently towards growth and innovation.
- Enhanced Legal Certainty: The consolidation of various directives into a unified framework aims to eliminate ambiguities and overlaps, providing companies with a clearer understanding of their obligations and reducing the risk of non-compliance.
- Improved Competitiveness: Simplifying the regulatory landscape is anticipated to make the EU a more attractive environment for business operations, potentially spurring investment and fostering economic growth.
Balancing Simplification with Sustainability Goals
While the primary aim of the Omnibus Simplification Package is to alleviate the regulatory pressures on businesses, this objective mustn't come at the expense of the EU's ambitious sustainability targets set in the EU Green Deal and Clean Industrial Deal.
Environmental advocates and certain member states have expressed concerns that diluting reporting requirements could undermine the transparency and accountability mechanisms essential for monitoring corporate ESG performance.
The European Commission has sought to address these apprehensions by emphasizing that the simplification efforts will not compromise the core principles of the existing sustainability directives.
Instead, the focus is on refining the regulatory approach to ensure it is both effective and efficient, fostering an environment where businesses can thrive without detracting from the EU's commitment to environmental stewardship and social responsibility.
Striking this delicate balance will be crucial in ensuring that regulatory efficiency and sustainability progress go hand in hand, reinforcing the EU’s role as a global leader in responsible business practices while creating a more predictable and business-friendly regulatory environment.
