On 26 February 2025, the European Commission published the Sustainability Omnibus legislative package. It proposes far-reaching changes, mainly on the scope of existing sustainability legislation.
Here are three takeaways on the key proposed amendments to the CSRD, CSDDD, and EU Taxonomy.
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1. Proposal for a Directive amending the CSRD and the CSDDD
This proposal aims to simplify the regulatory framework, reducing the administrative burden of the CSRD and CSDDD on businesses. It also seeks to limit the ‘trickle down’ of obligations on smaller companies by limiting the reporting information.
The Sustainability Omnibus package proposes the following changes.
CSRD
- Limited scope: It is proposed to restrict the scope of the CSRD reporting obligations to:
- large companies with over 1,000 employees and
- that meet at least one of the following criteria:
- A turnover exceeding EUR 50 million
- A balance sheet above EUR 25 million.
- The threshold for non-EU companies is proposed to increase from EUR 150 million net turnover generated in the Union to EUR 450 million. This adjustment aligns the scope of the CSRD more closely with that of the CSDDD. It is expected to reduce the number of in-scope companies by approximately 80%.
- Voluntary reporting: For companies outside the revised scope, the European Commission will adopt voluntary reporting standards based on the EFRAG’s VSME (Voluntary Standard for SMEs).
- Revision of the ESRS and removal of sector-specific standard: The Commission is committed to revising the European Sustainability Reporting Standards (ESRS) to reduce the number of data points, clarify ambiguous provisions, and improve alignment with other regulations. Additionally, the proposal eliminates the Commission's authority to create sector-specific standards, with the aim to simplify the overall framework.
- Value chain cap: the Commission will adopt a Voluntary Standard for SMEs (VSME) by a delegated act, limiting information requests from CSRD-covered entities. This standard aims to streamline and restrict the information that in-scope companies can request from companies in their value chains with fewer than 1,000 employees.
- Limited assurance standard: The proposal transitions from a reasonable assurance standard to a limited assurance standard, substantially reducing the scope of the assurance engagement.
CSDDD
- Direct suppliers: The proposal would limit due diligence obligations to direct business partners (tier 1). Companies would be relieved of the obligation to conduct due diligence on indirect business partners, unless there is credible information indicating potential impacts further down the value chain.
- Extension of maximum harmonisation: The proposal would introduce additional restrictions on Member States regarding the implementation of ESG due diligence rules on a national level.
- Climate plan: The proposal modifies the obligation to “put into effect” the mandatory climate plan under CSDDD. This modification seeks to clarify that companies are required to adopt a transition plan that includes specific implementing actions. The required level of ambition for the climate plan remains unchanged.
- Removal of uniform civil liability: The proposal would abandon the harmonised civil liability regime under CSDDD. Consequently, civil liability, including precedence over the laws of third countries, will remain subject to national civil law regimes.
- Penalty regime: The proposal suggests removing the provision for maximum monetary fines of at least 5% of net worldwide turnover from the public enforcement regime. Instead, guidelines for imposing fines will be established by the European Commission in cooperation with Member States.
- Removal of financial sector review clause: The proposal would eliminate the obligation for the European Commission to review by Q3 2026 whether due diligence obligations for regulated financial institutions should extend beyond their upstream chain of activities. The exclusion of downstream due diligence obligations for financial institutions is upheld.
- Limited scope: It is proposed to restrict the scope of the CSRD reporting obligations to:
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2. Proposal to postpone application of the CSRD and CSDDD
This proposal would delay all CSRD reporting requirements for companies scheduled to report in 2026 and 2027 (so-called wave 2 and 3) by two years. It would also extend the transposition deadline and the first wave of CSDDD application by one year to 2028.
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3. Proposal to amend Taxonomy Delegated Acts (open for public consultation)
This proposal addresses the Taxonomy Regulation’s reporting requirements, including the Disclosures Delegated Act, Climate Delegated Act, and Environmental Delegated Act. Key points are:
- Opt-in regime for large companies: Companies with more than 1,000 employees but a net turnover below EUR 450 million are not required to report under the EU Taxonomy unless they claim their activities are (partially or fully) Taxonomy-aligned. If claimed, they must disclose turnover and CapEx KPIs and may voluntarily disclose their OpEx KPI.
- Flexibility: Allows more flexibility to report on activities that meet certain technical screening standards without meeting all of them.
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Other proposals:
- A proposal for a Regulation amending the Carbon Border Adjustment Mechanism (CBAM) Regulation.
- Goal: Strengthen the CBAM for a fairer trade (90% importers will be exempted, most of which are SMEs)
- A proposal for a Regulation amending the InvestEu Regulation.
- Goal: Unlock potential in EU investments initiatives.
- A proposal for a Regulation amending the Carbon Border Adjustment Mechanism (CBAM) Regulation.
What this means for you
The Omnibus proposal represents a significant development with substantial impacts. Your company might fall out of formal scope, and for in-scope companies, detailed requirements may be drastically revised, regarding the CSRD, CSDDD and Taxonomy.
These proposed changes mark the initial step in the legislative process. The European Commission’s Sustainability Omnibus package will now be sent to the European Parliament and the Council, who will determine whether they agree with the proposal or seek additional changes.
This creates important questions as to what needs to be done regarding the FY2025 CSRD sustainability statements. From a technical perspective, the CSRD and CSDDD in their current form are the only valid Acts. Therefore, companies cannot put their preparations for the FY 2025 CSRD sustainability statements aside, until there will be further clarification as to how the proposal affects the timelines that have formally been adopted. This may change in the coming months if and when further guidance comes out. It will also be interesting to see what will happen to the Dutch CSRD and CSDDD Implementation Acts that are currently pending in Parliament.
The focus on voluntary reporting should also not be underestimated. As highlighted above, many companies may fall outside the CSRD’s scope due to proposed amendments, yet market practice might encourage voluntary applications and disclosures. Additionally, out-of-scope companies may be required to report voluntarily due to previously made commitments (climate commitments, adherence to net-zero alliances, etc.) or stakeholder expectations.
Want to know more?
Please reach out to our experts if you wish to discuss the possible impact of the Sustainability Omnibus Package on your organisation.
