EU sustainability reporting: Understanding the Omnibus proposal

Proposed reforms are set to reduce the sustainability reporting burden for businesses operating in the EU. Here’s the Hub lowdown on what might change.

What’s the Omnibus proposal? 

The European Commission’s Omnibus Simplification Package is a set of proposed amendments aimed at making corporate sustainability reporting more manageable while preserving the EU’s environmental objectives.

Currently, businesses must comply with multiple overlapping sustainability directives, including:

1. Corporate Sustainability Reporting Directive (CSRD),
2. Corporate Sustainability Due Diligence Directive (CSDDD/CS3D),
3. EU Taxonomy Regulation and;
4. Carbon Border Adjustment Mechanism (CBAM).

The Omnibus package seeks to streamline these frameworks by reducing redundancies, lowering compliance costs, and simplifying reporting obligations for companies of all sizes.

A first draft proposal of the Omnibus Package was released by the European Commission on February 26, 2025, generating considerable attention. The Commission has set an explicit goal of reducing reporting burdens by 25% for large companies and 35% for SMEs, reflecting a broader effort to balance regulatory efficiency with sustainability commitments.

The proposal will need to go through a “trilogue” of approvals of the 3 vital institutions: EU commission (may adjust the proposal), Council of the EU (reviews and votes) and EU Parliament (reviews and votes). Following agreement being reached by all parties, each EU Member State must incorporate the directive into national law within a set deadline.  

Companies will be categorised into different ‘waves’ based on when they are required to comply with the omnibus:

• Wave 1 – EU Listed Large Company.
• Wave 2 – Large Undertaking (More than 1000 employees and at least €50m turnover or €25m balance sheet)
• Wave 3 – SME entities (public interest entities, issuers or other non-complex institutions)
• Wave 4 – Non-EU companies (non-EU net turnover of €450m and EU Branch of EUR 50m or more)

Key changes under the Omnibus proposal

Corporate Sustainability Reporting Directive (CSRD)

• A two-year delay for companies yet to report but still within scope (wave 2).
• Alignment of CSRD and Corporate Sustainability Due Diligence Directive (CSDDD/CS3D) scope.
• Streamlining of European Sustainability Reporting Standards (ESRS), including the removal of sector-specific standards.
• 80% of companies exempted from “burdensome reporting” requirements.
• Voluntary reporting standards for companies outside the scope of CSRD.
• Exemption from value chain reporting for businesses with fewer than 1,000 employees.

Corporate Sustainability Due Diligence Directive (CSDDD/CS3D)

• Postponement of application by one year for wave 1 and wave 2 companies, until 2028 and 2029, respectively.
• Due diligence will now focus only on direct business partners (Tier 1 suppliers).
• Assessment frequency extended from every year to every five years.
• A more proportionate penalty system, no longer linked to company turnover.
• Removal of EU-wide civil liability requirements.

EU Taxonomy

• Reporting limited to largest companies (1,000+ employees and EU 450m), aligning with CSDDD/CS3D and voluntary full or partial CSRD companies.
• 80% of companies relieved from Taxonomy reporting obligations.
• Simplified key performance indicators for banks and other financial institutions.
• Partial alignment reporting allowed for companies under EUR 450 million turnover.
• Voluntary reporting option for smaller companies to demonstrate sustainability efforts.
• Flexibility in reporting introduced to reduce administrative burden.

Carbon Border Adjustment Mechanism (CBAM)

• Exemption for small importers (importing less than 50 tonnes annually).
• Simplified reporting and compliance requirements.
• Strengthened anti-circumvention measures to ensure fairness in global trade.
• First-year flexibility allowing importers to delay CBAM certificate purchases until February 2027.
• CBAM certificate management adjustment, reducing the required certificates from 80% to 50% of emissions.

Timeline and next steps

The Omnibus proposal is moving forward under an urgent procedure. The European Parliament is set to vote on activating this fast-track process on 1 April 2025. If approved, amendments and final votes could take place within the same plenary session and if not they could be further .

Once adopted, the new rules will take effect following publication in the EU Official Journal. However, specific implementation deadlines vary:

• CSRD reporting postponed until 2028 for affected companies.
• CSDDD requirements postponed until July 2028 for the largest companies.
• Taxonomy changes subject to a scrutiny period before final adoption.

Industry response to the Omnibus proposal

The Omnibus package has received mixed reactions from industry stakeholders. Many businesses and trade associations have welcomed the proposed simplifications, citing reduced administrative burdens and more manageable reporting obligations as significant benefits. The changes are particularly well-received by SMEs and companies struggling with the complexity of overlapping EU sustainability directives.

However, concerns have been raised by sustainability advocates and some policymakers, who argue that the proposal could weaken the EU’s environmental ambitions. Critics worry that loosening reporting requirements and delaying compliance timelines may reduce corporate accountability and hinder progress toward the EU’s sustainability goals. Pushback has also come from investors and financial institutions that rely on detailed sustainability disclosures to assess risks and opportunities. As a result, the proposal is expected to face intense scrutiny in the European Parliament, particularly from the Social Democrats (S&D) and the Greens, who are advocating for a more balanced approach to simplification without lowering standards.

What does this mean for UK businesses?

While the UK is no longer bound by EU regulations, businesses operating within the EU or engaging in cross-border trade will need to consider these changes. Key takeaways for UK firms include:

• Reduced reporting burdens for subsidiaries or entities doing business in the EU.
• CBAM changes may impact importers dealing with EU trade partners.
• Financial institutions operating in the EU will need to adjust reporting in line with new Taxonomy rules (Businesses should also assess whether they need to conform with UK CBAM which becomes operational in 2027).

Should businesses start preparing now?

The Omnibus package is expected to be adopted swiftly, making early preparation advisable. We’ll have an update on the Energy Advice Hub when changes are finalised.

Companies should also engage with EU-based partners to understand potential supply chain implications. In some cases, voluntary alignment with the new standards may offer competitive advantages.