On February 26, 2025, the European Commission adopted the Omnibus Simplification Package, a set of proposals aimed at reducing regulatory burdens for companies while maintaining the EU’s sustainability objectives. If approved by the European Parliament and the Council of the European Union, the package will reshape ESG reporting, supply chain due diligence, the EU Taxonomy, and the Carbon Border Adjustment Mechanism (CBAM). The goal is to enhance EU competitiveness and ease compliance amid growing global trade challenges.
Challenges in ESG reporting
Before the Omnibus proposal, companies struggled with:
- Complex ESG standards – The Corporate Sustainability Reporting Directive (CSRD) required double materiality assessments, making reporting complex and resource-intensive.
- Excessive data collection – Companies had to gather large amounts of ESG data across supply chains, significantly increasing costs.
- High compliance costs – CSRD implementation costs reached billions, with estimated annual savings of €4.4 billion expected under the Omnibus reforms.
- Uncertainty in regulatory timelines – With Wave 2 companies originally required to report in 2026, businesses faced unclear compliance deadlines.
Key changes in Omnibus
The Omnibus package proposes three major changes to CSRD:
- Higher reporting thresholds – Only 20% of originally covered companies will now need to comply. The new scope includes companies with more than 1,000 employees and either a turnover above €50 million or a balance sheet total exceeding €25 million. Listed SMEs will remain in scope.
- Extended reporting deadlines – Large companies will now report starting in 2028, while listed SMEs will report from 2029. However, companies that were already required to report from 2024 remain unaffected.
- Smaller reporting scope – The European Sustainability Reporting Standards (ESRS) have been simplified, reducing required indicators and eliminating sector-specific reporting.
Supply Chain Due Diligence (CSDDD) reform
The Corporate Sustainability Due Diligence Directive (CSDDD) will undergo significant modifications:
- Limited due diligence scope – Companies will only be required to assess direct suppliers, instead of their entire supply chain.
- Less frequent monitoring – Instead of annual checks, companies will now conduct due diligence every five years.
- Relaxed compliance measures – If suppliers fail to meet ESG criteria, companies will no longer be required to terminate contracts, only to suspend relationships.
- No mandatory climate transition plans – Companies will not be obligated to create climate transition strategies under CSDDD.
- Delayed implementation – The largest companies will now need to comply by July 2028.
EU taxonomy revisions
The EU taxonomy, which classifies environmentally sustainable economic activities, will also be simplified:
- Opt-in reporting for mid-sized firms – Companies with 1,000+ employees and turnover below €450 million will only report if they claim alignment with taxonomy rules.
- 70% fewer reporting templates – The reporting framework will be significantly streamlined.
- Simplified pollution prevention criteria – Stricter chemical compliance rules will be relaxed.
CBAM adjustments (Carbon Tariffs on Imports)
The Carbon Border Adjustment Mechanism (CBAM), which imposes a carbon tariff on imported goods, will see changes:
- Exemptions for small importers – Companies importing less than 50 tonnes per year will be exempt, removing 90% of importers from compliance requirements while still covering 99% of emissions.
- Simplified compliance rules – While reporting obligations will be reduced, anti-abuse measures will be strengthened.
Strategic implications
Despite regulatory relief, businesses must remain proactive. The double materiality principle remains intact, meaning companies must continue assessing how sustainability issues affect them and how they address these challenges. However, with smaller firms exempt, large corporations must now collect ESG data independently or rely on third-party providers.
Additionally, the Omnibus proposal limits supply chain due diligence to direct suppliers, contradicting the UN Guiding Principles on Business and Human Rights, which advocate for risk assessments across all supplier tiers.
What’s next?
For the Omnibus package to take effect, it must be approved by the European Parliament and the Council of the EU (55% of member states, representing 65% of the EU population).
Meanwhile, businesses should:
- Remain flexible – Prepare for multiple regulatory scenarios.
- Focus on action over compliance – Sustainability improvements matter more than reporting.
- Leverage digital tools – Digital platforms automate ESG data collection, drastically cutting manual effort.
While the Omnibus proposal simplifies compliance, uncertainties remain, and businesses must continue aligning with sustainability trends to stay competitive.
