On February 26, 2025, the Commission published its first set of omnibus proposals intended to simplify EU sustainability legislation, enhance competitiveness of EU industries and bring additional investment capacity. The Omnibus Package of proposals includes:
- A proposal for a Directive amending the requirements of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD);
- A proposal postponing the application of the CSRD for certain companies by two years and postponing the transposition deadline and the first wave of application of the CSDDD by one year;
- A draft Delegated act amending the Taxonomy Disclosures and the Taxonomy Climate and Environmental Delegated Acts;
- A proposal for a Regulation amending the Carbon Border Adjustment Mechanism Regulation (CBAM); and
- A proposal for a Regulation amending the InvestEU Regulation.
Changes to the CSRD framework
The CSRD, which entered into force on January 5, 2023, revised corporate sustainability reporting by amending previous legislation to require in-scope companies to report on their compliance with sustainability standards.
The Omnibus Proposal published yesterday seeks to introduce significant changes to the CSRD:
- Reducing the scope of companies subject to mandatory sustainability reporting by 80%, limiting it to large companies with more than 1,000 employees (i.e. companies that have more than 1,000 employees and either a turnover above EUR 50 million or a balance sheet above EUR 25 million).
- Proposing a voluntary standard for other companies based on the Voluntary Sustainability Reporting Standard for Micro-, Small-, and Medium-Sized Enterprises standards (VSME). That standard is intended to act as a cap on the information that companies falling under the scope of the CSRD can request from companies in their value chains with fewer than 1,000 employees.
- Postponing by two years the application of the reporting requirements for companies that are due to report in 2026 and 2027 (so-called wave 2 and 3 companies) while the co-legislators debate the Commission's proposed substantive changes.
- Revising the first set of European Sustainability Reporting Standards (ESRS), reducing mandatory data points and prioritizing quantitative information.
- Eliminating the power for the Commission to adopt sector-specific reporting standards.
- Removing the possibility of increasing assurance costs in the future.
- Providing targeted assurance guidelines by 2026 instead of mandatory standards.
- Creating a derogation for companies with more than 1,000 employees and a turnover below EUR 450 million by making Taxonomy reporting voluntary and introducing the option of reporting on partial Taxonomy alignment.
Changes to the CSDDD framework
The CSDDD, adopted on June 13, 2024, requires companies to identify and mitigate adverse human rights and environmental impacts in their operations, subsidiaries, and supply chains.
Under the current rules, Member States must transpose the CSDDD by July 26, 2026. The implementation will occur in successive stages to take into account the varying capacities of companies of different sizes to adopt the new framework.The three stages under the CSDDD are:
- From July 2027, the rules will apply to the largest EU companies (over 5,000 employees and a global net turnover above EUR1.5 billion) and non-EU companies with EU net turnover exceeding EUR 1.5 billion;
- From July 2028, EU companies with more than 3,000 employees and over EUR900 million net turnover, along with non-EU companies meeting these criteria, must comply;
- By July 2029, all other companies within the directive's scope must follow the rules.
By the final phase, the CSDDD will cover around 6,000 large EU companies and about 900 non-EU companies.
The Omnibus Directive Proposal introduces the following changes.
- Postpone the transposition deadline for the Member States by one year (to July 26, 2027) to account for possible delays in their ongoing CSDDD transposition efforts due to possible amendments to the Directive if the co-legislators agree to the substantive changes proposed.
- Postpone the first phase of the Directive's implementation by one year (to July 26, 2028), giving the initial group of companies (more than 5,000 employees and generating a net worldwide turnover of more than EUR 1.5 billion) more time to prepare for their obligations under the amended Directive. The July 26, 2028 deadline would accordingly apply to all companies with more than 3,000 employees and generating a net worldwide turnover of more than EUR 900 million.
- Simplify sustainability due diligence requirements including limiting full due diligence to business partners (except in cases where the company has plausible information suggesting that adverse impacts have arisen or may arise in the value chain beyond business partners) and reducing the frequency of periodic assessments and monitoring from annually to every five years, with ad hoc assessments as needed.
- Limit the amount of information that in-scope companies can request from their business partners with less than 500 employees to the information specified in the CSRD voluntary sustainability reporting standards (VSME standard).
- Increase harmonization to more due diligence requirements in a bid to address concerns with market fragmentation.
- Remove the duty to terminate the business relationship as a measure of last resort.
- Remove the 'minimum cap' for fines and tasking the Commission with developing fining guidelines.
- Remove aspects of the EU-wide civil liability regime and the rules regarding representative actions.
Changes to the Taxonomy Regulation
A separate legislative proposal regarding the reporting requirements under the EU Taxonomy Regulation has put forward by the Commission to simplify the framework and reduce the burden on companies.
The changes introduced can be summarized as follows:
- Companies falling under the scope of the CSRD (large companies with over 1,000 employees) and a net revenue of up to EUR 450 million: The Taxonomy reporting becomes optional, while remaining applicable to in-scope companies generating a turnover of more than EUR 450 million.
- Simplification of the reporting templates: This will result in a reduction of data points by nearly 70%, according to the Commission.
- Exemption for certain activities: This would relieve companies from assessing the Taxonomy eligibility and alignment of economic activities that are not financially material to their business (e.g., activities that do not exceed 10% of their total turnover, capital expenditure, or total assets).
- Revision of the Green Asset Ratio (GAR) for banks: Banks will be allowed to exclude from the GAR denominator any exposures related to entities that do not fall within the future scope of the CSRD (i.e., companies that are not large enterprises with 1,000 or more employees).
- DNSH criteria: The proposed changes involve simplifying the "Do No Significant Harm" criteria for pollution prevention and the control related to the use and presence of chemicals, including by removing the requirement to assess the use and presence of substances that have been self-classified according to the Classification, Labelling and Packaging (CLP) Regulation and do not have a harmonized classification.
Changes to the CBAM
The EU CBAM seeks to impose a levy related to the cost of the carbon emissions generated during the production of carbon-intensive goods imported into the EU. The Omnibus Directive Proposal introduces the following changes:
- Revision of the current de minimis threshold and exemption of small importers. A new annual threshold of 50 tonnes per importer would be introduced, exempting about 182,000 importers from CBAM obligations. Only less than 1% of emissions would be exempted, so over 99% of emissions will still be covered.
- Rules for companies still under the scope of the CBAM would be simplified. This would cover the following four categories: authorization of declarants, emission calculation, reporting requirements, financial liability.
- Effectiveness would be improved. This would cover rules to prevent circumvention and misuse, ensuring long-term efficacy.
- Future expansion of the CBAM is also envisaged. The Commission will carry out a full review of CBAM in 2025, to assess its potential extension to other ETS sectors, downstream goods and indirect emissions. This will then be reflected in a legislative proposal in early 2026.
What's next?
The legislative proposals will now be forwarded to the European Parliament and the Council for their review and approval. The Taxonomy public consultation is running until March 26, 2025.
We are actively tracking all progress and will update you on any major developments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
