The Omnibus and the Compass: more details emerge of EU plans to simplify sustainability legislation

On 29 January, the European Commission published an official communication on ‘A Competitiveness Compass for the EU’ (‘the Compass’). While fairly high-level, it gives some early insights into what the EU’s much anticipated sustainability ‘omnibus' package of measures might contain. If it is followed through, the omnibus package could herald a radical simplification of the legislative sustainability landscape.^[1]

The Compass covers several areas where the Commission has identified room for the EU to become more competitive. As expected, one area of focus is simplifying regulatory burden in the context of sustainability, whilst maintaining the same approach to sustainability overall. The Compass reiterates the previously stated goal of reducing the burden on businesses generally by 25%, and specifies that this means a 25% reduction in the costs of all administrative burden, not just in relation to reporting. 

The proposal forms part of the EU’s response to growing concerns over a lack of international competitiveness. In particular, the Compass responds to political demands by calling on the EU, national governments and institutions to simplify the regulatory landscape, increase the speed at which it operates, and show more flexibility.

What might change – the CSRD, CS3D, SFDR and taxonomy

The Compass explicitly mentions sustainable finance reporting, sustainability due diligence, and the green taxonomy as targets for change. As a baseline, this would mean amendments to the Sustainable Finance Disclosure Regulation, Corporate Sustainability Due Diligence Directive, and EU Taxonomy Regulation respectively. Despite not being mentioned explicitly, we still expect that the Corporate Sustainability Reporting Directive (CSRD) and its detailed reporting standards, the European Sustainability Reporting Standards (ESRS), will be at the centre of any reform. Although the omnibus procedure tends to be focused on fairly formal amendments, our impression is that there is appetite to move beyond form and address the substance of the targeted matters. Leading politicians of the bloc’s two largest economies, Germany and France, are seeming to push in this direction, with the French government writing to the EU to say that it should delay implementation of the CSRD by two years, and “massively” postpone sustainability due diligence rules. 

Some of these demands are already being heard. For example, the French proposal to create a category of mid-cap companies that are bigger than SMEs but smaller than large companies and subject to a lighter-touch regime has been included in the Compass.

More packages to follow?

Delivering this “unprecedented simplification effort” will start with “the first of a series of Simplification Omnibus packages” in February.^[2] A new Commissioner for Implementation and Simplification[3] has already been appointed to help usher in a more coordinated Commission response in this area and to steer the EU towards being more competitive while listening to industry representatives and other stakeholders. 

What’s next

This direction of travel will increase uncertainty for companies in the short term, but may lead to lighter obligations in the longer run, if they succeed in cutting red tape. One example is the non-EU European Sustainability Reporting Standards (NESRS). These are lighter-touch reporting standards that will apply to ultimate group parent companies established outside the EU and within scope of the CSRD, which are currently being developed by the European Financial Reporting Advisory Group (EFRAG). A consultation on the draft NESRS was expected to be announced in January, but there’s been no sign of this yet – perhaps an indication of EFRAG pressing pause whilst it waits to see where the omnibus instrument lands.

To address the uncertainty, companies will need to keep a close eye on developments and how they might impact them and their approach to sustainability reporting. As matters develop, there may be scope for companies to engage with the EU in order to help shape the outcome, or at least understand better where things are going. An upcoming roundtable organised for 6 February by the Commission in Brussels with representatives of industry, NGOs and other stakeholders is likely to be a first stage in developing concrete measures.

The Commission is expected to publish further details of the omnibus package in late February. 

[1] At the press conference held after the Economic and Financial Affairs meeting on 21 January 2025, the Polish Council Presidency said that if the package is not enough, we can expect another proposal to be presented.

[2] As reported at the press conference held after the Economic and Financial Affairs meeting on 21 January 2025.

[3]Commissioners-designate (2024-2029) - European Commission.