The EU 'Omnibus' package – what does this mean for the future of ESG reporting?

The European Commission has unveiled its first omnibus package, proposing significant amendments to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). This initiative aims to reduce the regulatory burden on businesses and enhance the EU's global competitiveness.

The proposal follows Mario Draghi's report, "The Future of European Competitiveness," which emphasised the need to cut red tape for businesses – a recommendation the Commission has taken to heart. On 29 January, the European Commission published a communication on a Competitiveness Compass for the EU, outlining strategic proposals for the next five years to help the EU "regain its competitiveness and secure its prosperity." A key focus of this initiative is simplifying the regulatory environment to reduce burdens on businesses, notably aiming to cut corporate sustainability reporting burdens by 25%. This commitment was reiterated in the Commission's 2025 Work Programme, which highlighted the introduction of the first omnibus package.

Omnibus package

The omnibus package comprises a draft directive amending the CSRD and CSDDD, a draft amendment to the Taxonomy Disclosures and Taxonomy Climate and Environmental Delegated Acts, a proposal to amend the Carbon Border Adjustment Mechanism Regulation (CBAM) and a proposal to amend the InvestEu Regulation.

The proposal put forward on 26 February is in draft form and the changes on the CSRD and CSDDD need to be formally agreed by both the European Parliament and Council before they can become law.

What do the changes being made to the CSRD, CSDDD and taxonomy mean for the future of ESG reporting?

Changes to CSRD

The package makes changes to the application of the CSRD, in that for those companies required to report as of 2026 or 2027, they will now have until 2028 to report.

Other changes made to the CSRD are as follows:

• Scope – Changing the scope to align with the CSDDD will mean companies with more than 1,000 employees and €450 million turnover must report under the CSRD. This removes around 80% of companies from scope.
• Non-EU companies – In line with this, non-EU companies must comply with the CSRD if they generate €450 million revenue in the EU (up from €150 million). They must still own either a large EU company or a branch to be obligated, but the branch threshold has been increased from €40 million to €50 million.
• Value chain – A requirement for information requests along the value chain for those stakeholders who are not required to report under CSRD has been removed.
• SMEs – There will be no mandatory sustainability reporting for listed SMEs.
• No new sectoral-specific standards – No new sectoral-specific standards are to be published.
• EU guidance on assurance requirements – The EU will issue guidance first before setting limited assurance requirements.

The Commission also intends to revise the current European Sustainability Reporting Standards to reduce the datapoints about which CSRD sustainability reporting must be produced and to put a greater focus on numerical/quantitative points (as opposed to narrative/qualitative information).

Changes to CSDDD

The transposition deadline for Member States under the proposal has been extended by one year, to 26 July 2027. In light of this delay, the first application has also been delayed by a year to 26 July 2028 for those companies with more than 3000 employees and a net turnover of more than €900 million. All other companies falling under the general scope will need to start applying the directive from 26 July 2029.

The proposal then sets out numerous changes to the substance of the CSRD which are as follows:

• Guidelines – The CSDDD guidelines are to be brought forward to 26 July 2026. The proposal outlines that this "two-year interval should provide companies with sufficient time to take into account the practical guidance and best practices included in the Commission’s guidelines when implementing due diligence measures."
• Scope of due diligence – The proposal narrows the meaning of value chain to reduce where due diligence needs to be conducted "to the companies’ own operations, those of their subsidiaries and, where related to their chains of activities, those of their direct business partners". Suppliers with less than 500 employees are excluded from this requirement. Companies only need to consider and risk assess Tier 1 suppliers (unless there is evidence that a Tier 2/Tier 3 supplier is underperforming on sustainability).
• Monitoring due diligence – Compliance monitoring with the CSDDD only needs to be every five years under the proposal, rather than annually.
• Transition plans – Net zero transition plans must be adopted, but no longer need to be implemented, a plan just needs to include "implementing actions".
• Corrective actions – No need to terminate supply chain relationships if an adverse impact is discovered and cannot be corrected. As a last resort businesses should "suspend the business relationship while continuing to work with the supplier towards a solution".
• Penalties – Specific level of 5% of net worldwide turnover would be removed. Penalties would be assessed in line with further Member State guidance, but no maximum limit is to be put in place.
• Harmonisation – The scope of "maximum harmonisation" to ensure CSDDD aligns well with other regulations is to be extended. Member States are also restricted in the proposal from introducing more stringent rules in relation to identifying and assessing actual and potential adverse impact.
• Civil liability – The proposal removes aspects of the civil liability clause, including that liability for due diligence failures will depend on national laws, not an EU-wide liability regime.  

Changes to EU Taxonomy

The omnibus package introduces several changes to the taxonomy framework. For companies within the new proposed CSRD scope (that is, large companies with more than 1,000 employees and a net turnover up to €450 million), the proposal envisages voluntary taxonomy reporting, reducing the number of companies obliged to report their taxonomy alignment. Companies that partially meet EU taxonomy requirements can voluntarily report their progress.

The Commission is also consulting on draft amendments to the Taxonomy Disclosures Delegated Act and the Taxonomy Climate and Environmental Delegated Acts. These amendments aim to simplify reporting templates, reducing data points by almost 70%, and exempt companies from assessing taxonomy-eligibility for non-material economic activities.

Osborne Clarke comment

The proposed changes made by the Omnibus Directive clearly reflect the EU's intention to simplify corporate sustainability reporting and due diligence.

The CSDDD changes are significant in reducing the due diligence obligations on companies. Equally so, the CSRD would be heavily altered under the proposals, through proposed changes to increase the threshold scope and significantly reduce the number of datapoints companies need to report against.

While the proposal aims to cut reporting obligations, it is important to recognise that these reductions are being made from an already high baseline of regulatory requirements. Many businesses will welcome the proposal, but the changes have caused significant political stir among Member States. Some, like France, are pushing for further simplification, whereas others, such as Spain and Italy, support less drastic changes.

Ultimately, we can expect this omnibus package to be a highly debated piece of legislation, and anticipate that changes will be made to the current proposal in order for an agreement to be reached. For businesses, this will mean keeping abreast of the final conclusions and understanding the impact of any changes on their operations.