The European Commission has unveiled the highly anticipated Omnibus Simplification Package, aimed at scaling back sustainability reporting and due diligence requirements for businesses across the EU. While the Commission frames the changes as necessary simplification measures, critics argue that they amount to significant deregulation, potentially weakening the EU’s climate action and human rights protections.
This package affects several key sustainability frameworks, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the EU Taxonomy, and the Carbon Border Adjustment Mechanism (CBAM). Keep reading as we explore the changes this proposal could bring about if it is approved.
Major changes to CSRD: Reduced scope and delayed deadlines
One of the most significant adjustments the EU Omnibus Package brings involves the CSRD. If the proposed changes pass the European Parliament’s vote, approximately 80 percent of companies initially expected to be subject to CSRD requirements will be exempt.
The focus will shift to only the largest companies, significantly reducing the scope of mandatory reporting. Moreover, the reporting deadlines for companies that were supposed to comply in 2026 or 2027 are would be extended to 2028.
This delay would provide companies with more time to prepare but also postpone the EU’s ability to fully monitor corporate sustainability practices. Another critical change is the removal of reporting obligations on the impact and activities of suppliers unless those suppliers themselves fall under mandatory reporting requirements.
Although the Commission argues that this revision prevents large companies from overburdening smaller firms within their value chains, critics warn that this undermines supply chain transparency and accountability.
Despite speculation, the double materiality approach remains intact, requiring companies to report on both their impact on the environment and society and how external risks affect their financial performance. However, the Commission plans to provide more guidance on its implementation to reduce complexity.
Gain actionable knowledge and tools to confidently navigate CSRD requirements and enhance reporting accuracy
Impact on EU Taxonomy, CSDDD, and CBAM
The EU Taxonomy changes in the Omnibus Simplification Package significantly narrow the scope of companies required to report. Only the largest firms (those with over 1,000 employees and an annual turnover above €450 million) will be obligated to comply, while smaller companies will be exempt but can report voluntarily.
To streamline the reporting process, the Commission will reduce reporting templates by 70 percent. Additionally, the “Do No Significant Harm” (DNSH) criteria will be simplified, raising concerns about the quality and depth of future disclosures. The CSDDD will now apply only to “direct business partners,” removing the requirement to assess risks across the entire value chain.
This change aims to reduce compliance burdens for large corporations but has been criticised for potentially decreasing transparency in supply chains. The frequency of mandatory assessments will be cut from annually to once every five years. One of the most controversial revisions is the removal of civil liability conditions, although companies must still compensate victims for harm caused by non-compliance.
This change has sparked concerns about reduced accountability for human rights violations and environmental harm in global supply chains. The CBAM will now include exemptions for small importers and SMEs, alongside a new annual threshold of 50 tonnes of embedded emissions per importer. This change is expected to exempt approximately 182,000 importers, mostly SMEs, from CBAM obligations.
For companies still within the scope, rules on calculating embedded emissions and authorisation processes will be simplified. Additionally, CBAM will be extended to other sectors within the EU Emissions Trading System (ETS) and to downstream goods, with new legislative proposals expected by 2026.
Conclusion: A step backward for corporate sustainability
The Omnibus Simplification Package is being positioned as a strategic move to reduce regulatory burdens and enhance EU competitiveness, with the European Commission projecting an additional €50 billion in public and private investment. However, the package significantly weakens sustainability reporting requirements, raising serious concerns among civil society groups, NGOs, and investors.
Critics argue that this rollback threatens progress on climate action, human rights protections, and fair trade, while also undermining investor confidence. Earlier this year, over 160 investors managing €6.6 trillion in assets urged the EU to maintain robust ESG reporting standards, cautioning that weakening these regulations would harm economic competitiveness and limit investment opportunities.
Effective sustainability reporting is vital for companies to accurately assess and mitigate their environmental and social impacts. By reducing the scope and frequency of these requirements, the EU risks creating an uneven playing field where only the largest corporations are held to meaningful standards. This could hinder transparency and accountability, ultimately impacting the EU’s sustainability and climate goals.
