The EU has published its much-anticipated Omnibus Proposal, which seeks to simplify the bloc’s bureaucratic red tape, particularly around sustainability commitments, while balancing regulatory goals with business competitiveness.
Announcing the measures, EU Commissioner Valdis Dombrovskis said, “While our commitment to securing the green transition has not wavered, we must acknowledge that this has come at a cost, generating a large regulatory burden on people and businesses.
“As we take stock, we see that this accumulation of rules, and their increased complexity, are limiting our economic potential and our prosperity.”
The proposal will now be presented for review by the European Parliament and the EU Council, following which, if approved, it will become a Directive, and incorporated into law by each EU member.
Here are five core takeaways from the EU Omnibus Proposal:
1. Fewer companies now required to report
The scope of the Corporate Sustainability Reporting Directive (CSRD) has been narrowed to cover only large companies with over 1,000 employees and either more than €50 million in turnover or €25 million in assets. This reduces the number of companies subject to mandatory reporting by approximately 80%, allowing SMEs to follow a voluntary standard developed by EFRAG, known as VSME.
“Those reporting voluntarily will have a simplified standard that would ensure consistency and comparability, to be adopted via a delegated act,” as Commissioner Maria Luís Albuquerque put it.
2. Supply chain reporting obligations have been reduced
Under the terms of the proposal, the extent of supplier data that companies must disclose has been reduced. This adjustment aims to ease the reporting burden on small and mid-sized businesses while maintaining due diligence requirements for larger firms.
Also, the Corporate Sustainability Due Diligence Directive (CSDDD) has been amended, with companies no longer required to cut ties with suppliers involved in environmental or human rights violations.
“Moves to limit the downstream burdens on smaller enterprises could be seen as running counter to the EC’s initial objectives, however the maintenance of the CSDDD, in particular, means organisations still need to get a better understanding of their suppliers’ impacts on human rights and the environment,” commented Matthew Bell, global leader, Climate Change and Sustainability Services at EY. “This will be a significant move forward in supply chain transparency and accountability.”
3. Sector-specific reporting standards removed
The obligation for the Commission to adopt sector-specific sustainability reporting standards by June 2026 has been removed. Companies will now align with broader global reporting standards rather than following additional EU-specific sectoral rules.
In terms of third-party assurance, the proposal retains the requirement for limited assurance but removes the possibility of transitioning to reasonable assurance. Instead of mandatory assurance standards by 2026, the Commission will issue targeted assurance guidelines, offering flexibility in compliance, a move that the EU hopes will reduce compliance costs.
4. Changes to the Carbon Border Adjustment Mechanism
The Carbon Border Adjustment Mechanism (CBAM), which imposes CO2 tariffs on imported goods, will largely remain in place, albeit with modifications. The reporting threshold will shift from a monetary value to a total mass limit of 50 tonnes per year, exempting 90% of companies while still covering 99% of emissions.
Reporting requirements will be streamlined, and companies will no longer need to purchase CBAM certificates in 2026.
5. Adjustments to EU Taxonomy reporting
The EU taxonomy, which defines sustainable economic activities, will now apply primarily to large companies with more than 1,000 employees and a turnover above €450 million. Reporting requirements will be significantly reduced, with the number of reporting templates decreasing by 70%.
Additionally, companies will only need to report on material activities, which the EU states will ease compliance.
“The move to simplification and alleviating the administrative burden is welcome,” commented Sean MacHale, Partner – Sustainable Finance, Head of FSO Climate Change & Sustainability Services, EY. “However delaying and descoping whilst the science remains unchanged and societal shifts continue, exposes financial institutions and the wider economy to ongoing risks whilst potentially missing opportunities to grow and develop more sustainable business models.
“Therefore, it is important for firms to continue to monitor and develop their process, leverage opportunities and make their strategy and business models more resilient to external factors, whilst driving long-term value and competitive advantages.”
Global reaction
A variety of NGOs have responses to the recommendations of the EU Omnibus Proposal, with a joint statement by Reclaim Finance, ActionAid France, Les Amis de la Terre France, CCFD-Terre Solidaire, Oxfam France, Notre Affaire à Tous, Sherpa and the CGT describing it as ‘a legislative proposal that brutally reverses crucial advances in the protection of human rights, the environment, and climate.
‘The European Commission’s Omnibus directive proposal is a ‘simplification’ in name only. In reality, it represents a massive and unprecedented deregulation, reminiscent of the ongoing deregulation policy in the United States. Presented hastily and without fully respecting democratic procedures, it targets public interest standards. These standards aim to prevent and remedy human rights and environmental violations caused by companies, while enabling economic and financial actors to align with European climate objectives.’
Responding to the proposal, Cameron Plese, market transformation, co-head of global government affairs, Roundtable on Sustainable Palm Oil, added, “The original goal of the CSDDD, CSRD and Taxonomy was to provide requirements for downstream supply chain actors to play a key role in improving production practices and impacts on communities.
“While the watering down of the reporting requirements will notably reduce this impact, our hope is that this can be continuously built upon to advance the role of global companies in sustainable supply chains.”
Maria van der Heide, head of EU Policy at ShareAction, described the proposal as a “very dark day for the EU. The European Commission is handing big businesses a free pass to avoid responsibility for their impact on people and the planet.
“Overall, this first Omnibus package paints a picture of a weak European Union, ultimately creating uncertainty, dismantling safeguards, and undermining trust in the EU’s ability to be a leader in sustainability. Rather than reinforcing Europe’s resilience, this proposal weakens its foundation – leaving companies, workers, affected communities, and EU citizens to pay the price.”
Meanwhile, Eurosif executive director Aleksandra Palinska commented, “The Commission’s proposal to reopen the CSRD and European Sustainability Reporting Standards for renegotiation creates legal uncertainty for investors and businesses, and harms the first movers who have already prepared their first sustainability reports or started working towards compliance.
“The proposal aims to reduce the number of in-scope companies by over 80%. Drastic changes to the scope of sustainability reporting rules will limit investor access to comparable and reliable sustainability data and impair their ability to scale-up investments for industrial decarbonisation and long-term growth. Voluntary reporting by companies will not fill this data gap.”
Elsewhere, Mariana Ferreira, sustainable finance policy officer at WWF European Policy Office, added “The Commission’s sudden urge to destroy laws that are crucial for the achievement of the EU Green Deal is a perilous approach that is forcing Europe into a time of regulatory uncertainty. Under the guise of “simplification”, the Commission put forward a proposal that will hinder economic and business success.
“Those who claim to advocate for long-term prosperity cannot, in good conscience, support an approach that strips the EU’s sustainable finance framework of its ambition, thereby taking Europe off its agreed course to become a competitive green economy. This sets a dangerous precedent with far-reaching consequences.”
