The European Commission published the Omnibus Simplification Package on 26 February 2025. The aim of this package of proposals is to streamline key EU regulations in the area of sustainability, eliminate duplication and reduce administrative burdens and compliance costs for companies. It also aims to maintain the EU's ambitious environmental objectives. If adopted as proposed, the package will give companies more time to comply with the reporting requirements of the Corporate Sustainability Reporting Directive (CSRD) and the supply chain due diligence obligations of the Corporate Sustainability Due Diligence Directive (CSDDD).

The Omnibus Simplification Package proposes to postpone by two years the entry into force of the CSRD reporting requirements for companies that have not yet started implementing them (i.e. large companies and listed SMEs). The new CSDDD framework in turn postpones the transposition deadline by one year (to 26 July 2027) and the first phase of application of the sustainability due diligence requirements for the largest companies (to 26 July 2028).

The package also proposes to revise the scope of the CSRD and the CSDDD. The reporting requirements under the CSRD would only apply to large companies with more than 1000 employees (and with a turnover of over €50 million or a balance sheet of over €25 million). Due diligence obligations under the CSDDD should be significantly narrowed, in particular by limiting to direct contractual partners.

While many businesses welcome the reduction of regulatory burdens and their postponement, some critics argue that it weakens corporate accountability and undermines transparency efforts. It is important to stress that the Omnibus Simplification Package is still at the draft stage and is expected to trigger intense debate in the European Parliament and the Council of the EU.

Proposed changes to the CSRD

In addition to the aforementioned two-year deferral for the second and third wave of companies, the Omnibus Directive II package proposes changes to the content and obligations themselves. The new thresholds mean that the sustainability reporting requirements would only apply to large companies or parent companies of large groups with more than 1,000 employees. This change would in itself reduced the number of businesses subject to mandatory reporting by approximately 80%. Simplified standards should be adopted for voluntary use by unlisted SMEs. The scope of sustainability topics within the European Sustainability Reporting Standards (ESRS) remains unchanged and the requirement dual materiality is not eliminatedHowever, a revision of the ESRS is proposed to reduce the number of mandatory data points. The proposal also removes the Commission's power to adopt sector-specific standards.

Another significant change is that the Omnibus Directive II proposal removes the requirement to move to reasonable assurance for the verification of sustainability reports. This would keep the verification at the limited assurance level, which is intended to save companies costs and time. For companies with more than 1,000 employees and an EU turnover of less than EUR 450 million, Taxonomy reporting becomes voluntary.

Proposed changes to the CSDDD

Apart from a one-year postponement for the first wave of companies (to 26 July 2028), Omnibus Directive II limits due diligence measures to its own operations, operations of subsidiaries and operations of direct business partners. Assessment of indirect business partners would only be required if the company has credible information indicating adverse impacts. The proposal also removes the obligation to terminate the business relationship in case of actual or potential adverse impacts; as a last resort, suspension of the business relationship is to be used instead. The interval for regular reviews and updates is extended to five years instead of one. Climate change mitigation plans no longer need to be "put into effect" but rather should contain an "outline of planned and implemented implementation measures". In order to reduce the burden on SMEs, the information required from direct partners with fewer than 500 employees will be limited to that covered by the voluntary standards for SMEs. Proposal expands the scope of maximum harmonisation CSDDD in order to ensure more uniform transposition by Member States. A specific pan-European civil liability regime is removes and Member States will be able to maintain such rules in their national legislation. The minimum ceiling for financial penalties is also abolished.

Political context and international oversight

The Omnibus Directive II proposal initiates a complex and lengthy legislative process in the EU. The political landscape in Europe has changed significantly since the adoption of the CSRD and CSDDD, with much a stronger focus on competitiveness, economic growth and simplificationThere are divergent views in the European Parliament – the centre-right Omnibus group welcomes the package, while the centre-left group opposes a significant weakening of sustainability rules. In the Council of the EU, member states also have different positions, although the majority is in favour of simplification.

European policymakers are also closely watching potential moves by the US. Twenty-six US states have sent a letter calling for retaliation against CSDDD because of its extraterritorial reach. Another letter calls for an indefinite suspension of the directive's implementation, arguing that the directive requires due diligence based on UN and OECD principles, which the US has not ratified, and that it ignores US corporate governance standards.

The Omnibus Simplification Package therefore represents a significant attempt to finding a balance between regulatory burdens on businesses and ongoing sustainability efforts within the EU. Its final form will be the result of ongoing political negotiations and discussions. Spring