The EU Omnibus Simplification Package: Overhauling Corporate Sustainability Regulations

At the end of February, the European Commission released its long-anticipated Omnibus Simplification Package — hailed as a significant development in the EU’s corporate sustainability regulations. The package seeks to streamline reporting obligations, reduce compliance burdens, and enhance competitiveness while maintaining the EU’s sustainability objectives, including the Green Deal and Net Zero targets.

The package introduces proposed key amendments to the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the EU Taxonomy, and the Carbon Border Adjustment Mechanism (CBAM). 

It is worth noting that the Omnibus Simplification Package must now proceed through the EU's legislative process, including approval from the European Parliament, and endorsement by all EU member states. As a result, further revisions are expected during the legislative process, which is set to continue throughout 2025.

Why Has The Omnibus Simplification Package Been Introduced?
In recent years the EU’s corporate sustainability landscape has been evolving at an unprecedented pace, but companies have voiced concerns over the sheer complexity and compliance costs of sustainability reporting, which some argue will hinder their competitiveness. There has been growing concern that excessive regulatory burdens may make the EU less competitive in an increasingly competitive, volatile and unpredictable global market.

Below is a summary of how the current Omnibus Simplification Package will impact corporate sustainability reporting and compliance obligations in the EU.

Corporate Sustainability Reporting Directive (CSRD)
The CSRD was originally designed to significantly expand corporate sustainability reporting obligations across the EU. However, the Omnibus Simplification Package introduces several key changes that considerably reduce the number of companies in scope and ease compliance obligations.

• Significant scope reduction with circa 80% of companies previously in scope now being exempt from mandatory reporting.
• Higher reporting thresholds as companies with more than 1,000 employees and a €50 million turnover are now required to report.
• Sector-specific reporting standards eliminated, simplifying data collection.
• Extended value-chain exemptions, shielding smaller suppliers from trickle-down compliance effects.
• Postponed implementation with large companies originally due to report in 2026 (Wave 2) and SMEs in 2027 (Wave 3) now have until 2028.
• Removal of reasonable assurance requirements with companies no longer needing to obtain reasonable assurance on sustainability disclosures.

Corporate Sustainability Due Diligence Directive (CSDDD)
The CSDDD was initially intended to impose stricter due diligence requirements across entire supply chains, but the Omnibus Simplification Package has reduced some of these obligations.

• Due diligence obligations are now limited to direct suppliers eliminating assessments across the entire value chain.
• Assessment frequencies are reduced, instead of conducting annual due diligence reviews, companies will now only need to assess compliance once every five years.
• Civil liability provisions removed, reducing the legal risks that companies face for non-compliance.
• Reduced penalties with the original provision linking fines to a company’s global turnover being removed.
• Exemptions introduced for SMEs and indirect suppliers, minimising trickle-down compliance reporting and costs for SMEs.
• Compliance date postponed with the implementation deadline being delayed by one year to July 2028 (previously 2027).

EU Taxonomy
The EU Taxonomy is the classification system that defines what constitutes sustainable economic activities. The Omnibus Simplification Package introduces several important adjustments.

• Only "very large" companies (more than 1,000 employees) will need to report.
• 80% of companies now exempt from mandatory Taxonomy alignment reporting.
• Introduction of optional reporting allowing companies to choose partial disclosure of their Taxonomy-aligned activities, without needing to meet full compliance.

Carbon Border Adjustment Mechanism (CBAM)
CBAM was introduced to prevent carbon leakage by applying a carbon price to imported goods, ensuring that companies producing outside the EU do not have an unfair advantage over domestic producers. The Omnibus Simplification Package makes the following modifications.

• The introduction of a new 50-tonne de minimums threshold resulting in the exemption of approximately 90% of importers—around 182,000 businesses— while still covering over 99% of the emissions within the mechanism's scope.
• Streamlined compliance and emissions calculations and reporting requirements making it easier for businesses still in scope to comply.

The Omnibus Simplification Package represents a significant recalibration of EU sustainability regulations. Although the European Commission describes the changes as ‘simplification,’ critics argue they amount to deregulation — reducing the scope of corporate sustainability reporting obligations and raising concerns about dilution of transparency and accountability.

No doubt the UK government's current consultation on ISSB IFRS S1 & S2 and the UK’s proposed CBAM will consider the changes outlined in the EU’s Omnibus Simplification Package. While these changes aim to ease compliance pressures, companies will still need to navigate evolving market expectations, investor demands, and supply chain requirements. As a result, companies will need to remain proactive in their sustainability strategies and stay alert to policy and regulatory changes, and market-driven expectations in what remains a highly unpredictable and rapidly evolving landscape.

Here is the link to the EU's Omnibus Simplification Package https://commission.europa.eu/publications/omnibus-i_en