On February 26, 2025, the European Commission announced a proposal for the Omnibus Simplification Package. This package aims to significantly simplify regulations in the areas of sustainability reporting and investment programs, based on the vision of strengthening EU competitiveness and economic prosperity. 

This article explains its key points. 

Background 

The Competitiveness Compass, building on the Draghi report, aims to strengthen EU competitiveness and prosperity. To achieve this, we need to reduce excessive regulatory burdens while still meeting our Green Deal objectives. 

The European Commission is recalibrating EU rules to be more growth-friendly and cost-effective, targeting at least 25% reduction in administrative burdens (35% for SMEs) before the end of its mandate. The February 11 work programme announced these Omnibus packages to address overlapping and disproportionate rules. 

Today’s proposals simplify sustainability and EU investment regulations through amendments to the CSRD, CSDDD, CBAM, and InvestEU Regulation, alongside a draft Taxonomy Delegated Act. The goal is clear balance our sustainable transition ambitions with enhanced EU business competitiveness. 

CSRD

1. Reduced Scope of Reporting Companies 

  • New threshold: Only companies with more than 1,000 employees (and either €50 million turnover or €25 million balance sheet total) 
  • Impact: Reduces companies in scope by approximately 80% 
  • Alignment: Better matches the CSDDD thresholds 

2. ‘Value Chain Cap’ Protection 

  • Voluntary standard: For companies with fewer than 1,000 employees 
  • Shield function: Limits what information larger companies can request from smaller value chain partners 
  • Implementation: To be adopted via delegated act based on EFRAG’s SME standard (VSME) 

3. Simplification of Reporting Standards 

  • ESRS revision: Substantial reduction in required data points 
  • Clarification: Making unclear provisions more understandable 
  • Consistency: Better alignment with other legislation 

4. Elimination of Sector-Specific Requirements 

  • Removes Commission’s power to adopt sector-specific standards 

5. Assurance Requirements Eased 

  • Eliminates the planned progression from limited to reasonable assurance 

6. Extended Implementation Timeline 

  • Two-year postponement: For companies not yet implementing CSRD and listed SMEs (Wave 2 and 3) 
  • Purpose: Allows time for agreement on the Commission’s substantive changes 

CSDDD

1. Extended Implementation Timeline 

  • One-year postponement: Delays transposition deadline to July 26, 2027 
  • First phase application: Pushes requirements for largest companies to July 26, 2028 
  • Earlier guidance: Commission guidelines advanced to July 2026 
  • Benefit: Companies can prepare better with less reliance on legal services 

2. Simplified Value Chain Assessment 

  • Indirect partners: Removes obligation for systematic assessment of entire value chain 
  • Risk-based approach: Full due diligence beyond direct partners only required when plausible information suggests adverse impacts 
  • Impact: Significantly reduces complexity of compliance 

3. Reduced Monitoring Frequency 

  • Assessment intervals: Extended from annual to every 5 years 
  • Exception: Assessment and updates required when measures appear inadequate 
  • Additional simplifications: Streamlined stakeholder engagement obligations 
  • Relationship termination: Removes obligation to end business relationships as last resort 

4. Protection for Smaller Partners 

  • Information requests: Limits what in-scope companies can ask from SMEs and small midcaps (≤500 employees) 
  • Standardization: Information requests limited to VSME standard content 
  • Exceptions: Additional information only when necessary and unavailable through other means

5. Civil Liability Changes 

  • National regimes: Defers to national civil liability frameworks 
  • EU harmonization: Removes harmonized EU conditions 
  • Representative actions: Revokes Member State obligations regarding trade union/NGO actions 
  • Third country rules: Leaves national law to determine jurisdictional questions 

6. Other Key Modifications 

  • Climate transition plans: Aligns requirements with CSRD 
  • Harmonization: Extends maximum harmonization to core due diligence obligations 
  • Financial services: Removes review clause on including financial services in scope 

How the Omnibus Package Protects SMEs and Small Mid-caps 

The “Trickle-Down” Problem 

While most SMEs are technically exempt from CSRD requirements, they often face sustainability information requests when they: 

  • Are part of larger companies’ value chains 
  • Work with financial institutions like banks 

1. Voluntary SME Standard 

  • What: A simplified voluntary standard (VSME) developed by EFRAG 
  • Implementation: To be adopted as a delegated act 
  • Purpose: Provides a simple tool for sustainability reporting 

2. Information Request Limitations 

  • Key protection: CSRD companies cannot request information beyond what’s in the VSME standard 
  • Impact: Prevents excessive reporting demands on smaller companies 
  • Interim measure: Commission will issue recommendations based on VSME standard until formal adoption 

3. Similar Protections Under CSDDD

  • Information limits: Large companies can only request VSME-specified information from SMEs and small midcaps (≤500 employees) 
  • Exceptions: Only when standard doesn’t cover relevant impacts 
  • Additional relief:  
    • Reduced due diligence beyond direct partners 
    • Assessment frequency reduced from yearly to every 5 years 

These measures significantly reduce reporting burdens for smaller companies in larger companies’ value chains while maintaining essential sustainability information flow. 

Expected Benefits of the Proposed Modifications 

CSRD Benefits 

  • Significant cost savings: Approximately €4.4 billion in total annual savings 
  • Breakdown of savings:  
    • €0.8 billion annually from reduced Taxonomy reporting requirements 
    • €1.6 billion in one-off savings from avoided CSRD/ESRS setup costs 
    • €0.9 billion in one-off savings from avoided Taxonomy setup costs 
  • Overall impact: Enhanced EU competitiveness through reduced administrative burden 

CSDDD Benefits 

  • Simplified framework: Less complex, more harmonized sustainability due diligence requirements 
  • Major cost savings from:  
    • Simplified due diligence for indirect business partners 
    • Reduced monitoring frequency (every 5 years instead of annually) 
    • Protection for smaller companies from excessive information requests 
  • Estimated savings: At least €320 million annually plus substantial one-time savings 
  • Level playing field: More consistent application across the EU 

These modifications maintain sustainability objectives while significantly reducing compliance costs and complexity for businesses. 

Double Materiality Principle Preserved 

The omnibus proposal maintains the essential ‘double materiality perspective’ of the CSRD. This means companies still in scope must continue reporting on: 

  • How sustainability risks affect their business operations and performance 
  • How their activities impact people and the environment 

Despite the various simplifications, this fundamental principle remains intact, ensuring that comprehensive sustainability reporting continues to address both financial and impact considerations. This preservation of double materiality demonstrates the Commission’s commitment to maintaining robust sustainability disclosure standards even as it works to reduce administrative burdens. 

EU Taxonomy

1. Optional Reporting for Medium-Sized Companies 

  • Voluntary reporting: For companies with >1,000 employees but ≤€450 million turnover 
  • Impact: Reduces mandatory reporting burden for medium-sized enterprises 

2. Partial Taxonomy Alignment Recognition 

  • New option: Companies can report partial alignment with Taxonomy requirements 
  • Benefit: Acknowledges progress and transition efforts rather than only full compliance 
  • Incentive: Encourages continued sustainability improvement 

3. Simplified Reporting Requirements 

  • Template simplification: 70% reduction in required data points 
  • Materiality threshold: Exemption from reporting on activities below 10% of turnover, CapEx, or assets 
  • Standardization: Commission to develop standardized content and presentation formats 

4. Banking Sector Improvements 

  • Green Asset Ratio (GAR) calculation: Banks can exclude exposures to companies outside CSRD scope 
  • Effect: More accurate reflection of banks’ sustainable financing activities 

5. “Do No Significant Harm” Criteria 

  • Simplification options: Two alternative approaches under consultation 
  • Focus area: Chemical-related pollution prevention criteria 
  • Application: Would affect all economic sectors under the Taxonomy 
  • Public input: Stakeholders invited to provide feedback on both options 

These changes aim to make the Taxonomy more workable while maintaining its core purpose of identifying sustainable economic activities. 

CBAM

1. Small Importer Exemption 

  • New threshold: Importers bringing in less than 50 tonnes of CBAM goods per year 
  • Emissions impact: Approximately 80 tonnes CO2 equivalent per importer 
  • Beneficiaries: Primarily SMEs and individuals 
  • Complete relief: These importers face no CBAM obligations whatsoever 

2. Simplified Compliance for Remaining Importers 

  • Streamlined processes:  
    • Easier declarant authorization 
    • Simplified emissions calculations 
    • Reduced reporting requirements 
    • Clearer financial liability rules 

3. Enhanced Effectiveness Measures 

  • Anti-abuse provisions: Strengthened safeguards 
  • Coordinated enforcement: Joint anti-circumvention strategy with national authorities 

These changes aim to eliminate unnecessary administrative burdens for about 90% of importers while maintaining oversight of more than 99% of emissions covered by the mechanism. 

Next Steps

Current Status: European Commission Proposal Stage (February 26, 2025) 

Deliberation and Decision by Parliament and Council 

The deliberation on the legislative amendments for the CSRD Directive, CSDDD, and CBAM Regulation (Level 1 process) may take six months to over a year. An important point to note is that this bill does not suspend current regulations, and existing legal frameworks remain in effect. This means that companies must continue to comply with current regulations while the amendments are being deliberated.

The proposed amendments to the delegated acts of the Taxonomy Regulation (Level 2 process) will be adopted after a four-week public consultation period. This will apply after the scrutiny period by the European Parliament and Council (usually 2 months), during which the Parliament or Council may object to the delegated act and prevent it from coming into force.

Voting in the European Parliament

  • Adoption requires an “absolute majority”
  • Approval from more than half of all Members of the European Parliament (MEPs), not just those present, is essential

Voting in the European Council

  • Adoption requires a “qualified majority”
  • Approval from at least 55% of member states (15 or more out of 27 countries)
  • Additionally, the approving countries must represent at least 65% of the total EU population

If approved by both institutions, the bill will pass, and the new simplified sustainability regulations will be implemented.

Future Outlook

Companies should view this simplification trend not merely as a “reduction of reporting burden”, but as a strategic opportunity to transform sustainability initiatives into competitive advantages. It is also important to position such regulatory changes not just as compliance issues but as key strategic challenges, and to develop practical response measures and forward-looking strategies. We will continue to provide regular updates on the latest developments.

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