EU's Simplification Omnibus Package: Major Sustainability Reporting Changes Unveiled

The European Commission has unveiled a sweeping set of legislative changes aimed at simplifying sustainability reporting and EU investment regulations. These reforms, branded as the 'Simplification Omnibus Package,' promise to reduce compliance burdens, enhance business competitiveness, and unlock billions in investment capacity.

The proposed changes mark a significant shift in the EU’s approach to sustainability disclosure and corporate due diligence, with estimated savings of over €6 billion in administrative costs and €50 billion in mobilized investments.

Omnibus Package: Key Changes in Sustainability Reporting (CSRD & EU Taxonomy)

The Corporate Sustainability Reporting Directive (CSRD) and the EU Taxonomy are at the heart of the Omnibus Package, with several major changes proposed:

• Reduced Scope of CSRD: Approximately 80% of companies currently within the CSRD scope will no longer be required to report, shifting the focus to the largest entities (those with more than 1,000 employees and either a turnover exceeding €50 million or assets over €25 million).

• Extended Reporting Deadlines: Companies that were required to begin reporting in 2026 or 2027 will now have an additional two years, with deadlines pushed to 2028.

• Simplified EU Taxonomy Reporting: Reporting obligations will be reduced and aligned with the Corporate Sustainability Due Diligence Directive (CSDDD), allowing smaller companies to report voluntarily.

• Partial Taxonomy Alignment Option: Companies can now report activities partially aligned with the EU Taxonomy, making it easier to demonstrate a transition towards sustainability.

• Financial Materiality Threshold Introduced: Reporting will be streamlined with a materiality threshold, reducing business complexity.

• Do No Significant Harm (DNSH) Criteria Simplification: The most complex DNSH criteria, particularly those related to pollution prevention and chemical use, will be revised to ease compliance.

• Bank Reporting Adjustments: The Green Asset Ratio (GAR) will be modified to exclude exposures to companies with fewer than 1,000 employees and €50 million turnover.

Simplified Due Diligence Under the Omnibus Reforms

The changes to the Corporate Sustainability Due Diligence Directive (CSDDD) aim to make compliance more manageable for companies while maintaining core environmental and social responsibility goals:

• Narrowed Due Diligence Scope: Systematic due diligence will now focus primarily on direct business partners rather than entire value chains.

• Less Frequent Monitoring: Instead of annual assessments, due diligence reviews will occur every five years, with additional assessments only when necessary.

• Reduced Reporting Burden on SMEs: The amount of due diligence information that large companies can demand from SMEs in their supply chains will be limited.

• Harmonization Across the EU: The new rules ensure a level playing field, preventing fragmentation across Member States.

• Civil Liability Adjustments: While preserving victims' rights to full compensation, the EU civil liability conditions will be removed, keeping liability within national legal frameworks.

• Extended Compliance Timeline: Companies will have an additional year to prepare, with the application of new rules postponed to July 2028.

Carbon Border Adjustment Mechanism (CBAM) Reforms

To further streamline regulatory requirements, the EU has introduced several changes to the Carbon Border Adjustment Mechanism (CBAM):

• Exemption for Small Importers: A new threshold of 50 tonnes per importer will exempt around 90% of small businesses, eliminating unnecessary reporting for approximately 182,000 companies.

• Simplified CBAM Obligations: Easier authorization for declarants, simplified emissions calculations, and reduced reporting requirements.

• Enhanced Anti-Circumvention Rules: Strengthened mechanisms to prevent businesses from bypassing CBAM obligations.

• Future Expansion Considerations: Plans are in place to extend CBAM coverage to additional sectors and goods by early 2026.

Investment Simplifications and Increased Financial Capacity

The Commission is also refining its investment framework to optimize funds and unlock further opportunities:

• InvestEU & EFSI Enhancements: By reusing returns from past investments and optimizing legacy financial instruments, the EU expects to mobilize €50 billion in additional public and private investments.

• Easier Member State Contributions: New mechanisms will allow countries to invest in priority projects with reduced administrative hurdles.

• SME-Focused Savings: The simplifications are expected to generate €350 million in cost reductions for SMEs and financial intermediaries.

Next Steps and Implications for Businesses

The proposed legislative amendments will now undergo scrutiny by the European Parliament and the Council. If adopted, these changes will enter into force following their publication in the EU Official Journal. Businesses should closely monitor the implementation timeline to adjust their reporting strategies accordingly.

While the simplification effort is a step forward in reducing administrative burden, some stakeholders argue that the reforms could dilute transparency and weaken the EU’s commitment to sustainability. However, the Commission maintains that these changes will enhance economic resilience while keeping the Green Deal’s objectives intact.

At ESG Voices, we will continue to track these developments, providing insights and analysis on how businesses can navigate this evolving regulatory landscape.

For more detailed information, you can access the European Commission's official press release here.

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