First EU Omnibus package on sustainability simplification: what to know

“Sustainable competitiveness” is more than ever at the forefront of EU policy priorities. Following recommendations set out in the much commented Draghi Report on EU Competitiveness, according to which notably the “EU’s sustainability reporting and due diligence framework is a major source of regulatory burden, magnified by a lack of guidance to facilitate the application of complex rules and to clarify the interaction between various pieces of legislation”, the Commission announced in its Competitiveness Compass for the EU of January 2025 a series of simplification omnibus packages.

The first Omnibus Package published on 26 February 2025 (“Omnibus Package”) aims in particular to simplify sustainability-related reporting obligations and to substantially reduce the scope of companies currently subject to such reporting as follows:

• The main measures labelled “omnibus I” include  a proposal for a directive amending the Corporate Sustainability Reporting Directive (“CSRD”) and the Corporate Sustainability Due Diligence Directive (“CSDDD”), which also affects reporting under the EU Taxonomy, as well as an additional proposal for a directive to postpone the reporting requirements for certain companies under the CSRD and delay the transposition of the CSDDD (“Stop-the-clock Directive”).
• A draft Taxonomy Delegated Regulation, amending the Taxonomy Disclosures Delegated Act, as well as the Taxonomy Climate and Environmental Delegated Acts, is open for public consultation until 26 March 2025.
• In addition, the Omnibus Package brings amendments to the EU’s Carbon Border Adjustment Mechanism (CBAM), the EU’s tool to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, through a proposal for a regulation amending the CBAM regulation.
• Finally, a proposal for a regulation amending the InvestEU and EFSI Regulations, the so-called “omnibus II” or “Investment Omnibus” completes the package, InvestEU being the Union’s largest risk-sharing instrument to support priority investments within the Union, of which the European Fund for Strategic Investments (EFSI) is a key component.

As set out in the Q&A on omnibus I and II, the Commission estimates that, if adopted and implemented as set out in the Omnibus Package, total savings in annual administrative costs of around EUR 6.3 billion for companies could be achieved, and additional public and private investment capacity of EUR 50 billion could be mobilised to support EU policy priorities such as those set out in the Competitiveness Compass and the Clean Industrial Deal.

The main impact of the Omnibus Package on sustainability reporting under the CSRD, the CSDDD and the Taxonomy is discussed below.

CSRD

Reduced scope

The Omnibus Package proposes to reduce the current scope of the CSRD by about 80%. The reporting requirements would only apply to large undertakings with more than 1000 employees on average (i.e. undertakings that have more than 1000 employees and either a turnover above EUR 50 million or a balance sheet above EUR 25 million). This revised threshold would align the CSRD more closely with the CSDDD.

• The reduced scope would have a substantial impact on companies currently in scope of the CSRD such as investment fund managers (AIFMs and UCITS management companies) although companies could still be subject to consolidated sustainability reporting at group level. Investment fund managers were invited by the CSSF earlier this year to assess whether they would fall within the scope of the CSRD – the package will likely affect this assessment.
• Certain NFRD obliged entities would also be excluded from the scope of the revamped CSRD.

Delayed reporting

The Stop-the-clock Directive proposes to postpone by two years the entry into force of the reporting requirements for the so-called second wave (large undertakings that are not public interest entities and that have more than 500 employees, as well as large undertakings with fewer than 500 employees) and the third wave (listed SMEs, small and non-complex credit institutions, and captive insurance and reinsurance undertakings). The objective of the postponement is to avoid a situation in which certain undertakings would be required to report for the 2025 financial year (second wave) or the 2026 financial year (third wave) and would then be subsequently relieved from this requirement.

Reporting standards and audit

The Commission intends to adopt without delay a delegated act to revise the ESRS to substantially reduce the data points to be reported on. The proposal removes the empowerment for the Commission to adopt sector-specific reporting standards and the possibility for the Commission to propose moving from a limited assurance requirement to a reasonable assurance requirement.

CSDDD

Delayed reporting

The Stop-the-clock Directive proposes to extend the transposition deadline of the CSDDD by one year (until 26 July 2027) and, similarly, to postpone by one year the date by which the first group of companies in its scope is to apply its provisions.

Adverse impact

The Omnibus Package proposes to relieve companies from the obligation to systematically conduct in-depth assessments of adverse impacts on their indirect partners in case of suspicions of adverse impacts.

Simplified due diligence requirements

The Omnibus Package proposes to reduce the frequency of periodic assessments and monitoring by in-scope companies of their partners from annually to every five years, with ad hoc assessments where necessary.

Alignment with CSRD

The Omnibus Package proposes to align the requirements on the adoption of transition plans for climate change mitigation with the CSRD.

Financial services

It is proposed to delete the review clause on inclusion of financial services in the scope of the CSDDD.

Taxonomy

Alignment with CSRD

For companies within the revised CSRD scope, the Omnibus Package proposes voluntary Taxonomy reporting in Omnibus I. This will reduce the number of companies that are obliged to report their Taxonomy-alignment. However, companies that have made progress towards sustainability targets, but only meet certain EU Taxonomy requirements could voluntarily report on their partial Taxonomy-alignment.

Simplified reporting

The objective of the draft Taxonomy Delegated Regulation is to simplify reporting templates, with a consequent reduction of data points by almost 70%. It also proposes to exempt companies from assessing Taxonomy-eligibility and alignment of their economic activities that are not financially material for their business. In addition, amendments are proposed to the main key performance indicators of financial institutions, especially the green asset ratio (the “GAR”) for banks. In relation to the GAR, banks will be able to exclude from the denominator of the GAR exposures that relate to undertakings which are not under the revised scope of the CSRD.

Next steps

The Omnibus Package has been submitted to the European Parliament and the Council for their consideration and adoption. The Commission has invited the co-legislators to treat the Omnibus Package as a priority, in particular to reach rapid agreement on the proposed Stop-the-clock Directive to provide the necessary legal clarity for  companies concerned.

In Luxembourg, there has been no further progress to date on Bill N°8370 with respect to the transposition of the CSRD since the end of 2024. No bill of law with respect to the transposition of the CSDDD has been submitted to the Luxembourg parliament so far.

The potential impact of the Omnibus Package on Luxembourg’s legislative process remains unclear for the moment. As long as no relevant new laws are adopted, entities currently in scope of the CSRD and the CSDDD should follow developments closely.