On February 26, 2025, the European Commission introduced a new Omnibus package that could significantly change corporate sustainability in the EU. An Omnibus package is a legislative tool used to bundle multiple regulatory changes into a single proposal, making it easier to amend existing laws in a coordinated way. This package aims to reduce reporting requirements, delay deadlines, and remove thousands of companies from existing sustainability regulations.
The Commission justifies this move by arguing that sustainability regulations must be simpler and more business-friendly to encourage economic growth. This reasoning is largely based on the Competitiveness Compass, a strategy introduced by the Commission in early 2024 to improve the EU’s economic strength and global attractiveness. It follows recommendations from the Draghi report, a key analysis led by former European Central Bank President Mario Draghi, which highlighted the need to reduce regulatory burdens on businesses to foster innovation, investment, and job creation.
By implementing the Omnibus package, the Commission hopes to make sustainability rules more practical while maintaining Europe’s leadership in corporate responsibility. However, critics worry that this regulatory rollback could slow down corporate climate action and reduce transparency. Many companies have already spent significant resources preparing for stricter regulations, and the sudden shift may create legal uncertainty. The debate is now open: is this a pragmatic adjustment or a step backward for sustainability in Europe?
A Radical Cut to Sustainability Regulations
The Omnibus package represents the biggest effort so far to simplify EU sustainability rules. The European Commission estimates that the proposed changes will save companies around €6.3 billion per year in administrative costs. This initiative is part of a broader push to make sustainability rules more proportional, especially for smaller businesses that struggle to comply with complex reporting frameworks.
One of the most significant changes is the massive reduction in the number of companies required to report under sustainability regulations. The Corporate Sustainability Reporting Directive (CSRD), which was originally expected to apply to thousands of businesses across Europe, will now only apply to the largest corporations. The EU Taxonomy, a classification system for sustainable activities, will also become much easier to follow, with 70% fewer data points required.
The timeline for compliance is also shifting. Companies that were due to report under CSRD in 2026 and 2027 will now have until 2028, giving them more time to adapt. The Corporate Sustainability Due Diligence Directive (CSDDD), which requires companies to assess human rights and environmental risks in their supply chains, will also be delayed by one year. The European Commission believes these changes will allow companies to better integrate sustainability into their long-term strategies without being overwhelmed by bureaucracy.
Major Changes to Sustainability Directives
The Corporate Sustainability Reporting Directive (CSRD) was designed to improve transparency by requiring companies to disclose how their activities impact the environment and society. However, businesses have long complained that the reporting process is too complex and expensive, especially for those that are not multinational corporations. The Omnibus package significantly reduces the number of companies affected. Now, only businesses with more than 1,000 employees will be required to report under CSRD, cutting the number of companies in scope by approximately 80%.
The European Commission is also introducing changes to limit the burden on smaller businesses that are part of larger companies’ supply chains. A new “value chain cap” will prevent large companies from demanding excessive sustainability data from their smaller suppliers. This change is meant to protect SMEs from being forced to comply with indirect reporting requirements. Additionally, companies with less than €450 million in revenue will now have the option to report under the EU Taxonomy on a voluntary basis, rather than as a legal requirement.
The Corporate Sustainability Due Diligence Directive (CSDDD) was designed to make businesses responsible for human rights and environmental risks in their supply chains. However, many companies have criticized the directive, arguing that it is too rigid and costly to implement. The Omnibus package relaxes several key requirements.
One of the most important changes is that due diligence will only apply to direct suppliers, unless a company has specific reasons to believe that risks exist further down the supply chain. This change is intended to make the directive more practical and manageable for businesses while still holding them accountable for sustainability risks.
The European Commission is also reducing the frequency of due diligence assessments. Instead of requiring companies to update their risk assessments every year, the new rules will allow them to conduct reviews every five years, unless new risks emerge. Additionally, large businesses will no longer be allowed to demand excessive sustainability information from SMEs, which should reduce compliance pressure on smaller companies.
The EU Taxonomy was introduced as a tool to help investors and businesses classify sustainable activities. However, many companies found its reporting requirements too complicated and expensive to implement. The Omnibus package makes significant changes to make the system more flexible.
Companies that are required to report under CSRD will now have fewer reporting obligations under the EU Taxonomy, with an estimated 70% reduction in required data points. Additionally, businesses will no longer be required to assess the sustainability of economic activities that account for less than 10% of their revenue. This means that companies engaged in only minor sustainable activities can opt out of full Taxonomy reporting, reducing administrative work.
Another key change is the introduction of partial Taxonomy reporting. Companies that are working towards sustainability goals but have not yet fully aligned with the Taxonomy criteria will be allowed to report on their progress rather than meeting all requirements immediately. This flexibility is intended to encourage businesses to transition toward greener practices without being penalized for not achieving full compliance right away.
Mixed Reactions: A Balance Between Relief and Uncertainty
The European Commission’s Omnibus package is getting mixed reactions from businesses, investors, and policymakers. On one hand, large companies are relieved that the Corporate Sustainability Reporting Directive will now apply only to firms with over 1,000 employees, sparing thousands of businesses from complex reporting rules. But this change also creates uncertainty, especially in countries that already have stricter national regulations, leaving companies to figure out how to comply with both. For small and mid-sized businesses, the reform is a welcome break—they’ll no longer be pressured to provide sustainability data for larger firms’ reports, allowing them to focus on running their operations without extra red tape. However, investors are worried that scaling back corporate sustainability disclosures will lead to less transparency and more greenwashing, making it harder to tell which companies are actually committed to ESG goals and which ones are just talking the talk.
Meanwhile, several EU countries have already introduced tougher sustainability laws, which could create a messy, inconsistent regulatory landscape where companies are stuck navigating different rules across borders. For instance, Germany enacted the Supply Chain Due Diligence Act, which came into effect in 2023. This law mandates that companies with over 3,000 employees (expanding to those with over 1,000 employees in 2024) are responsible for monitoring human rights and environmental standards throughout their supply chains. France has also been at the forefront, being the first European country to transpose the Corporate Sustainability Reporting Directive into national law on December 6, 2023. This early adoption underscores France’s commitment to enhancing corporate transparency and accountability in sustainability matters. Additionally, countries like Denmark, Ireland, Romania, Slovakia, Sweden, and the Czech Republic have already integrated the CSRD into their national legislation, reflecting a broader trend within the EU to strengthen sustainability reporting frameworks at the national level.
While the Omnibus package is meant to cut bureaucracy and boost competitiveness, it raises big questions about the future of corporate accountability and sustainability in Europe.
Conclusion: A Simplification That Questions the Future of the Green Deal
The Omnibus package marks a turning point in the EU’s approach to corporate sustainability, aiming to simplify regulations and reduce burdens on businesses while trying to maintain environmental accountability. By narrowing the scope of sustainability reporting and delaying compliance deadlines, the European Commission hopes to boost competitiveness and investment. However, this shift has led to significant debate, as many fear it could weaken corporate transparency, increase greenwashing risks, and create regulatory inconsistencies across the EU. While smaller businesses and large corporations welcome the relief from complex reporting frameworks, investors and environmental advocates warn that the rollback could undermine the EU’s climate ambitions.
With several EU countries already implementing stricter sustainability laws, the divergence between national and EU-level regulations could lead to further uncertainty for companies operating across multiple jurisdictions. As the Omnibus package moves to the European Parliament and the Council of the EU for final approval, the key question remains: can the EU balance economic growth with its Green Deal commitments? The outcome of this legislative process will not only define the future of corporate sustainability rules but also determine whether Europe remains a leader in responsible business practices or takes a step back in the fight against climate change.
Written by Anastasia Binando and Benjamine Daniau-Fricotteau
Sources:
https://ec.europa.eu/commission/presscorner/detail/de/qanda_25_615
