This month, the European Commission announced the Omnibus Proposal, a new legislative measure aimed at simplifying corporate sustainability reporting. The proposal, presented on February 26th, seeks to reduce regulatory burdens for EU entities.

While it is still too early for definitive conclusions and the full impact remains to be seen, this blog post breaks down key updates, outlines next steps, and provides insights on how organizations and sustainability managers can navigate the evolving regulatory landscape.

A Recap of the Omnibus:
How We Got Here

In November 2024, in response to concerns over regulatory complexity, Ursula von der Leyen announced the Omnibus Proposal to “reduce bureaucracy and reporting burdens.” This initiative follows a Council request for a 25% reduction in reporting burdens for large organizations and 35% for SMEs, reflecting a broader effort to streamline sustainability disclosures while maintaining the EU’s ambitious environmental goals.

Currently, businesses can be in scope for multiple sustainability reporting requirements, each with distinct but interconnected objectives. These include the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the EU Taxonomy Regulation, and the Carbon Border Adjustment Mechanism (CBAM). The Omnibus proposal aims to reduce administrative burden, eliminate redundancies, lower compliance costs, and create a more efficient reporting system.

On the back of the release of the Competitiveness Compass, the European Commission published the Omnibus Simplification Package, explaining that the proposal would take the form of several packages. Omnibus I and II were the first to be presented by the Commission on February 26th.

Key Takeaways from the Proposal:
Omnibus I and II

The Omnibus I and II introduced major changes across sustainability and investment simplification, in particular targeting CSRD, CSDDD, EU Taxonomy, and CBAM. A summary of the main proposed changes is provided below.

Changes to the Corporate Sustainability Reporting Directive (CSRD)

1.New Scope-in Criteria: Mandatory only for large organizations with >1,000 employees AND either a) > EUR 50M turnover or b) > EUR 25M balance sheet. Organizations with 250–1,000 employees are no longer in scope.

2.Value Chain Cap & New Simplified Standard: From out-of-scope value chain partners, large organizations can only request sustainability data as per the new simplified reporting standard (based on the VSME standard by EFRAG). Organizations no longer in scope can opt-in voluntarily to continue ESG reporting.

3.Revised European Sustainability Reporting Standards (ESRS): Substantial reduction of the number of ESRS data points, focusing on quantitative over qualitative disclosures.

4.No More Sector-Specific Standards: Sector-specific ESRS requirements have been removed.

5.Limited Assurance Only: The potential transition to reasonable assurance audits has been removed, keeping limited assurance only.

6.Double Materiality Concept Stays: No changes to the double materiality concept. Organizations will have to continue conducting double materiality assessments.

7.Two-Year Reporting Delay for Wave 2 & 3 Organizations: Wave 2 (2026 reporting) and Wave 3 (2027 reporting) organizations get a two-year postponement, while Wave 1 (2025 reporting) remains unchanged.

Changes to the Corporate Sustainability Due Diligence Directive (CSDDD)

1. Focus on Direct Business Partners: Organizations are only required to conduct due diligence on direct suppliers, unless credible evidence of risks exists for indirect suppliers.

2. No More Forced Contract Terminations: Instead of mandatory termination, organizations can now suspend relationships with non-compliant suppliers while working toward a resolution.

3. Less Frequent Monitoring Requirements: Organizations must now review and update due diligence processes every 5 years, instead of annually.

4. Narrower Scope of Engagement: Organizations only need to consult directly affected stakeholders, limiting the information to request from their SME and small midcap business partners.

5. EU Civil Liability Removed: The 5% minimum fine requirement is removed, and EU-wide liability is replaced by national enforcement under domestic legal frameworks.

6. One-Year Delay in Implementation: The CSDDD transposition deadline is postponed to July 2027, with the first wave of organizations now required to comply from July 2028 (instead of 2027).

7. Transition Plans Alignment CSDDD & CSRD: The CSDDD and CSRD requirements on the adoption of transition plans for climate mitigation have been aligned.

Changes to the EU Taxonomy

1. New Scope-in Criteria: Mandatory only for large organizations with >1,000 employees AND >EUR 450M turnover. Organizations below this threshold can voluntarily disclose limited taxonomy data. This separates EU Taxonomy reporting from CSRD, as the scope is no longer identical.

2. Amendments to Reporting Requirements: i) Reduction of mandatory reporting data points by 70%, ii) Introduction of a 10% materiality threshold for assessing activities related to Turnover/CapEx, and of 25% related to OpEx. iii) Simplification of the Do No Significant Harm (DNSH) criteria.

3. Changes to Financial Sector KPIs: Amendment to the Green Asset Ratio (GAR) calculations to allow banks to exclude organizations outside the new CSRD scope from their denominator.

Changes to the Carbon Border Adjustment Mechanism (CBAM)

1. Exemption for Small Importers: 90% of small importers (SMEs and individuals) will be exempt from CBAM.

2. Threshold for Imported Goods: A minimum threshold of 50 tonnes of imported goods per importer will apply.

3. Further Simplifications: Existing CBAM rules will be streamlined, making compliance easier, while targeted rules will be introduced to prevent circumvention and ensure fair application.

Immediate Next Steps:
EU Parliament and Council Review

The Omnibus proposal by the EU Commission poses major changes to sustainability reporting, significantly impacting EU entities. It is important to note that it is still only a proposal for now. The next step in the EU legislative process is a review of the proposal by the European Parliament and the Council. These bodies can either approve the proposal as it is or request revisions and adjustments before adoption. This means there is still room for modifications before the legislation becomes final.

Given the urgency of these changes, the Commission has requested the Parliament to prioritize and fast-track its review through the “urgency procedure.” This could accelerate the process, though the exact timeline remains uncertain and it is expected to take several months.

If the Proposal Is Approved, What Is the Main Impact?

The Omnibus Proposal will have the greatest impact on Wave 2 and Wave 3 CSRD reporters and SMEs in corporate value chains.

For Wave 2 and Wave 3 organizations, originally set to begin reporting in 2026 and 2027, the proposal delays obligations by two years, with most being removed from scope entirely. This represents an estimated 80% reduction in the number of organizations required to report compared to the previous rules.

For SMEs in corporate value chains, the proposal limits sustainability data requests from larger organizations to what is covered in a simplified voluntary reporting standard (VSME), reducing trickle-down reporting obligations.

What Should Organizations & Sustainability Managers Do?

To ensure compliance, organizations should reassess their reporting needs and determine their next steps based on their scope, regulatory requirements, and strategic priorities.

Organizations still in scope of CSRD (>1,000 employees)

• Wave 1: In EU countries where CSRD is already transposed, reporting obligations remain legally binding until the Omnibus is fully approved. Organizations in these countries must continue their reporting efforts.

• Wave 2 and 3: The two-year delay provides more time to prepare, but core CSRD principles (e.g., Double Materiality Assessment) remain unchanged. Organizations should stay on track and keep preparing for sustainability reporting.

Organizations no longer in scope of CSRD (250-1,000 employees) 

Even if CSRD no longer applies, the sustainability challenges facing the planet still present major risks and opportunities for organizations – effectively managing these will remain an important strategic tool for successfully navigating a changing world. Organizations should stay flexible to future regulatory shifts while building long-term value by considering the following next steps:

• Adopt the new VSME standard: A simplified sustainability reporting standard that requires less effort and is essential for organizations in larger value chains.

• Focus on Double Materiality Assessment (DMA): A cornerstone of sustainability strategy, helping identify key ESG risks, impacts, and opportunities for your business.

• Measure Emissions & Carbon Footprint: Climate change is still a reality, and understanding your company’s footprint while taking action to decarbonize remains crucial. 

• Prioritize Quantitative Metrics: Focus on decision-useful sustainability data that support business and stakeholder needs.

• Consider Stakeholder Expectations: Investors, customers, and employees still expect sustainability data and reporting remains valuable beyond regulation.

Atlas Metrics is here to help you navigate these changes and ensure your sustainability strategy remains on track.

If you would like to know more about Omnibus and what it means for your organization, join us for our Webinar on March 6th.

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