The EU’s Sustainability Omnibus Proposals: Key Changes and Business Implications

Rationale for the Omnibus Proposal

The European Union has acknowledged growing concerns from businesses regarding the complexity and administrative burden of sustainability regulations. The Draghi report and the Competitiveness Compass called for reforms to allow EU businesses to remain competitive in a global economy, and the Commission is now undertaking a broad effort to simplify and streamline EU rules. This first Omnibus package focuses on EU sustainability rules and regulations, with proposals designed to reduce administrative and compliance burdens for SMEs.  

The proposed amendments are expected to generate an estimated €6.3B EUR in annual cost savings and mobilize €50B EUR in public and private investment to support sustainability initiatives.

Key Changes Proposed in the Sustainability Omnibus 

1. Corporate Sustainability Reporting Directive (CSRD) Amendments

The CSRD, which took effect in January 2024, significantly expanded corporate sustainability disclosure requirements for companies with operations or listings in the EU.  The first wave of large public companies are publishing reports under the CSRD this year (2025).  Other large companies are slated to report for the first time in 2026, with listed SMEs following a year later. However, as many companies — especially SMEs — began preparing for these new reporting obligations, some raised concerns regarding the compliance burden. The Omnibus package includes two separate proposals:  one that would defer the reporting deadlines in the current CSRD, and another that proposes substantive amendments to the CSRD. 

Under the first proposal, the deadline for companies originally required to report in 2026 and 2027 (wave 2 and 3 companies) would be postponed for two years.  The European Commission has requested that this proposal be “fast-tracked” so that these companies can have more time to prepare to report as the EU bodies deliberate on the other proposed changes.   

The second proposal includes the following amendments to the CSRD:

• Revised scope: CSRD requirements would now apply only to large companies with more than 1,000 employees and either €50M EUR in net turnover or a balance sheet total above €25M EUD. Under this new scope, approximately 80% of previously covered businesses would no longer be required to comply with the CSRD. 
• Double materiality remains unchanged: The proposal does not alter the fundamental principle that companies covered by the CSRD must assess and disclose both how sustainability matters impact their financial performance (financial materiality) and how their operations impact people and the environment (impact materiality). 
• Sector-specific reporting standards removed: The CSRD required the European Commission to adopt sector-specific standards for additional reporting, which would have been issued by the summer of 2026. Under the Omnibus proposal, this authority would be deleted.
• Simplification of European Sustainability Reporting Standards (ESRS): The European Commission and EFRAG have committed to review the ESRS.  Alongside the amended CSRD, the Commission will also issue revisions to the ESRS that would reduce the number of required data points and clarify reporting guidelines. 
• No transition from limited to reasonable assurance: The CSRD provided that the Commission would adopt standards for reasonable assurance by 2028; under the proposal, this authority would be deleted — meaning the assurance requirements will remain at the “limited” level. The Commission would issue targeted guidelines for limited assurance by 2026. 
• Expansion of the “value chain cap” for SMEs:  Companies not in scope of the CSRD would be encouraged to report based on the Voluntary SME Reporting Standards (VSMEs), developed by EFRAG and to be adopted by the Commission.  The amended CSRD would set these standards as the “Value Chain Cap” — placing a limit on the information in-scope companies can request from smaller, out-of-scope companies in their value chain. 
• Digital tagging for sustainability reporting remains: The CSRD includes requirements for machine-readable digital tagging for sustainability reports to improve accessibility and streamline compliance. The requirement would remain, but full implementation of XBRL tagging would be postponed until the official digital taxonomy is adopted, based on technical advice being developed by the European Securities and Markets Authority. 

2. Corporate Sustainability Due Diligence Directive (CSDDD) Amendments

The CSDDD mandates that companies conduct due diligence on human rights and environmental impacts in their operations and supply chains. The Omnibus package introduces the following proposed revisions (also split between a proposal for postponement and a proposal for substantive amendments):

• Extended timeline: The initial deadline for EU Member States to implement the CSDDD would be extended by one year (to July 2027), and the compliance deadline for the first set of obligations would be postponed from 2027 to 2028, providing businesses with additional time to prepare. The EC would also develop guidelines on a faster timeline to support companies with compliance.
• Focus on direct suppliers (aka “Tier 1” suppliers):  To reduce the burden on companies complying with the CSDDD, the EC proposed removing requirements for full due diligence related to indirect business partners unless there is plausible evidence of adverse impacts.
• Less frequent monitoring requirements: The requirement for annual due diligence updates would be extended to once every five years, reducing administrative costs.
• Reducing burdens on suppliers: Similar to the CSRD, the information companies complying with the CSDDD can request from smaller supplies (up to 500 employees) would be limited to the VSMEs. 
• Alignment with CSRD transition plan reporting requirements: To better align the CSRD and CSDDD, and to clarify expectations, the CSDDD would no longer include a requirement to put a transition plan “into effect.” Companies in scope of the CSDDD would still be required to adopt a transition plan and would need to include information about implementing actions planned and taken in their transition plan disclosures. 
• Civil liability determined by member states: Instead of implementing an EU-level liability framework and penalty caps, liability would be determined at the national level.  The Commission will develop guidelines to support harmonization. 

3. Adjustments to the EU Taxonomy 

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The EU Taxonomy is a reporting framework designed to facilitate sustainable investments.  Reporting on EU Taxonomy alignment is part of the current CSRD requirements. The Omnibus package includes a proposal to make EU Taxonomy reporting voluntary for companies with less than €450M EUR annual net turnover, and to allow reporting about partial alignment. In addition, the Commission is proposing amendments to the Delegated Acts that set out the substantive requirement for EU Taxonomy reporting, including:

• Streamlined taxonomy reporting: The number of required data points for EU Taxonomy disclosures would be reduced by 70%, simplifying the templates and streamlining compliance.
• Materiality threshold for taxonomy alignment: Companies would not be required to assess or report on economic activities that do not exceed a materiality threshold of 10% (of total turnover, capex, or total assets).

4.  Carbon Border Adjustment Mechanism (CBAM)

The CBAM is a requirement designed to impose a carbon price on certain materials imported into the EU. The Commission is proposing changes to the Regulation.

• Simplified CBAM Compliance: The CBAM reporting process will be streamlined, and a new threshold would exempt approximately 90% of small importers, reducing administrative complexity while still covering 99% of emissions.

5. InvestEU Regulation Reforms

The InvestEU program facilitates sustainable finance and investment initiatives. The Omnibus proposal introduces changes to unlock €50B EUR in new investment capacity, including:

• Reduced administrative burdens for SMEs and financial intermediaries participating in InvestEU projects.
• An increase in the EU guarantee by €2.5B EUR, allowing for expanded investments in sustainability initiatives.
• Improvements in reporting efficiency, freeing up resources for investment rather than compliance.

Next Steps for the Omnibus Proposal

The Omnibus proposal will now be reviewed by the European Parliament and the Council under the ordinary legislative procedure. The Commission has asked both institutions to prioritize and expedite the package — particularly the changes postponing certain disclosure requirements under the CSRD and the transposition deadline under the CSDDD.  

During the review process, Parliament and the Council may propose different amendments or revisions to the proposals, and ultimately, the three bodies must reach a consensus.  For the proposals to amend the CSRD and CSDDD, once the revised Directives are agreed upon, EU Member States would have 12 months to transpose the Omnibus amendments into their national laws. Meanwhile, the draft Delegated Act updating the Taxonomy Regulation will be released for public consultation shortly.  The EC will develop a final proposed Taxonomy Regulation, which will apply after Parliament and the Council have a window of opportunity to review (aka a “scrutiny period”).

A Balancing Act Between Competitiveness and Climate

The EU’s Sustainability Omnibus Proposal represents a significant recalibration of sustainability regulations. For most companies, these adjustments offer welcome relief. They also empower companies to make strategic decisions about how sustainability can help them remain competitive. The challenge for many will be finding the right balance as they navigate the regulatory uncertainty ahead.

Organizations will still need to understand the material risks and opportunities facing their businesses — and be ready to meet stakeholder requests for information about their sustainability impacts. 

European business-to-business demands will be shaped by the VSMEs. Global investor demand will be shaped by peer activity. And customer, employee, and civil society expectations will put pressure on organizations to provide reliable information about their risks and impacts. 

To respond to these evolving regulations and pressures, companies can focus on strengthening their sustainability capabilities and establishing efficient data systems to inform their business decisions. Improvements they make now will provide them with the information needed to remain competitive — regardless of where the Omnibus proposals land. 

Persefoni is here to help navigate these evolving sustainability regulations. Our team of experts can help you stay up-to-date, adapt to changes, and position your business for long-term success. 

Feel free to contact us directly with any inquiries or explore Persefoni Consulting Group to learn more about how we can help you prepare for evolving global compliance demands and stakeholder expectations.