The Sustainability Omnibus - Streamlining Sustainability Regulation

On 26 February 2025, the European Commission published its proposals for the first in a series of ‘omnibus’ packages, aimed at streamlining the EU’s sustainability and value chain due diligence legislation. The proposals hope to reduce sustainability reporting burdens on corporates and financial institutions by 25% through a process of simplification and make the EU more globally competitive. 

The Commission is focussing on legislating for the very largest companies and reducing what it is they have to do - whilst ensuring small and medium-sized enterprises (SMEs) are shielded from the burden of much of this legislation. The proposals also signal a recognition that companies need more guidance from the EU, sooner, on how to meet their obligations, and that assurance remains an ongoing challenge. 

This first sustainability package reopens previously settled flagship sustainability legislation, including the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive (the CSRD and CS3D respectively). It also lays out plans to simplify and improve the usability of the European Sustainability Reporting Standards (ESRS) significantly, launches a four week call for evidence on a draft delegated act to amend the EU’s Taxonomy regime, and gives some detail on plans to reduce the number of Carbon Border Adjustment Mechanism (CBAM) reporters.

The most significant proposed changes include that: 

1. The CSRD will apply to ‘large undertakings’ with over 1000 employees, and to certain non-EU parent companies with a turnover of over EUR 450 million in the EU. Application dates are to be pushed back by two years for some of those not yet required to report. SMEs are to have greater protection from obligations being passed onto them by larger companies. The ESRS will be significantly simplified. 
    
2. The CS3D will apply a year later than before, and its value chain due diligence obligations will no longer include indirect suppliers (subject to an exception where there is “plausible information” of an adverse environmental or human rights impact). Union-wide (but not national) civil liability has been removed, and guidance on the level of fines is to follow. Obligations relating to transition plans remain, and plans must include implementing actions, but no longer need to be “put into effect”. 
    
3. EU Taxonomy reporting will be simplified, and companies will not need to assess Taxonomy-eligibility and alignment of their economic activities where those activities are not financially material for their business (e.g., those not exceeding 10% of their total turnover, capital expenditure, or total assets). 
    
4. The CBAM will still apply to 99% of relevant emissions, but the changes will eliminate 90% of reporters from scope.

The proposals now need to go through the EU’s usual legislative process, which means further changes may be proposed. EU Member States will also have to transpose any changes to existing EU directives into national law in order for those to be applicable to companies. Whilst the proposals may increase uncertainty in the medium term, they could lead to lighter obligations in the long term. 

Our briefing provides more detail on the relevant timescales, the main changes proposed, and how companies can respond to the uncertainty.