EU Omnibus Package: Practical Impacts on Corporate Reporting and Sustainability
The European Commission recently introduced the Omnibus package of regulatory changes concerning sustainability. This set of proposals amends both ESG reporting rules under the Corporate Sustainability Reporting Directive (CSRD) and supply chain due diligence obligations under the Corporate Sustainability Due Diligence Directive (CSDDD).
The aim is to simplify requirements, reduce administrative burdens, and focus on the largest companies that have the most significant impact on the climate and society.
What does this mean for companies in practice?
Below, we summarize the key changes in reporting and sustainability requirements – and why ambitious companies do not need to wait for legislation to make progress in sustainability.
Changes in Reporting Requirements (CSRD)
The new proposals significantly reduce the number of companies required to conduct non-financial reporting and postpone deadlines for initial disclosures. They also simplify the content of reports and some related obligations. The key changes include:
A narrower scope of mandatory reporting: CSRD obligations will now apply only to large companies with more than 1,000 employees (and either a turnover of more than €50 million or assets over €25 million). This change excludes approximately 80% of businesses that were originally covered by the directive. Smaller firms will no longer have a legal obligation to issue sustainability reports.
Delayed reporting deadlines: Companies that were initially expected to report for the first time in 2026 and 2027 (the second wave of CSRD, covering many mid-sized companies) will now receive a two-year delay. The second wave is postponed to 2028. This gives companies more time to prepare high-quality reporting. (However, the first wave of large companies with over 500 employees will still report in 2025 for data from 2024, with no changes.)
Simplified standards and fewer data points: Even for companies that remain subject to mandatory reporting, requirements will be relaxed. The European Sustainability Reporting Standards (ESRS) will be simplified, with a 70% reduction in the number of indicators and reported data points. Additionally, previously planned sector-specific standards will not be introduced.
No stricter verification requirements: The current “limited assurance” audit level will remain, and the EU has dropped plans to transition to the stricter “reasonable assurance” level. Instead, it will issue only non-binding guidelines by 2026. Overall, compliance with reporting obligations will become administratively easier.
Voluntary reporting for others: Companies no longer covered by CSRD can choose to report voluntarily. The Commission plans to introduce a voluntary standard for small and medium-sized enterprises (VSME), based on EFRAG guidelines. This simplified framework will allow smaller businesses to disclose ESG data on a voluntary basis while following established CSRD methodologies if they wish. It will also set a cap on what information large corporations and banks can demand from smaller partners – companies with fewer than 1,000 employees will be protected from excessive requests, and larger firms will only be allowed to request data within this standard’s scope.
Adjusted EU Taxonomy obligations: Changes will also affect reporting under the EU Taxonomy (classification of sustainable activities). Going forward, only the largest businesses with a turnover exceeding €450 million will be required to comply. Other companies will be able to report taxonomy indicators voluntarily. This means that small and medium-sized enterprises will face less administrative burden and reduced “green tape” (bureaucracy related to sustainability regulations).
What does this mean in practice?
Many mid-sized companies that were already preparing for mandatory ESG reporting may find that they will no longer be required to report at all under the new rules. The largest corporations will still have to report, but they will receive more time and simplified methodologies.
For investors and the public, this means that fewer companies will be required to disclose sustainability-related data, and less information will be published overall. However, regulators argue that companies exempted from mandatory reporting can focus more on their business development and voluntarily engage in sustainability efforts with less bureaucracy.
Changes in Sustainable Due Diligence Requirements (CSDDD)
The second key area affected by the Omnibus package is the rules on due diligence for suppliers and supply chains under the CSDDD. Here, too, the Commission aims to ease extreme requirements and make obligations more realistic for companies while preserving the directive’s core purpose (ensuring that large firms address human rights and environmental risks in their business relationships). The main proposed changes include:
Later implementation and focus on the largest players: The transposition of the directive and the first phase of mandatory application for the largest companies (the first wave) will be delayed by one year – from July 2027 to July 2028. The directive will primarily apply to companies with over 1,000 employees (using the same threshold as CSRD), further reducing the number of affected businesses.
Due diligence primarily for direct suppliers: Companies will be required to assess risks and negative impacts mainly for their direct business partners (Tier 1 suppliers). Investigating indirect subcontractors further down the supply chain will only be required if there is credible information or indications of violations (e.g., human rights abuses or environmental risks). This significantly narrows the scope of due diligence to a more manageable level – firms will not have to automatically monitor every single supplier in their global network unless there are specific concerns.
Less frequent audits and greater flexibility: The frequency of risk assessments will be extended from annually to once every five years (unless significant new circumstances arise suggesting that previous measures were inadequate). This means that companies will not need to conduct full due diligence audits every year, but only once every five years, significantly reducing administrative workload.
Milder sanctions and liability framework: Originally, the directive proposed strict penalties (fines linked to company turnover) and a uniform civil liability regime across the EU. The new proposal removes fixed turnover-based fines – penalties will instead be determined by national regulators based on general guidelines. Additionally, the EU will no longer impose a uniform civil liability framework – meaning the directive will not explicitly state that companies are legally responsible for damages caused by supply chain violations. Instead, this will be left to national legal systems.
Overall Impact of CSDDD Changes:
These changes make CSDDD more practical and manageable for businesses. Multinational corporations will still be responsible for ensuring sustainable supply chains, but the legal and administrative risks will be lower than originally expected. The proposal also aligns more closely with existing national laws – for example, Germany’s Supply Chain Act already focuses on due diligence for direct suppliers.
However, it is important to note that these changes are still proposals – the European Parliament and the Council must review and approve them, which may take several months, and the final version could still change.
Sustainability as Best Practice: Business Ambition vs. Regulation
Regulatory relief does not mean that companies should abandon sustainability – on the contrary.
Companies serious about sustainability do not need legislation to act. Many businesses already report their ESG activities voluntarily because they see it as beneficial for their business, reputation, and investor relations.
Even though the proposed changes will remove ESG reporting obligations for up to 80% of companies, many will continue reporting voluntarily.
Why?
Business Partner Expectations: Large corporations covered by CSRD and CSDDD will still require sustainability data from their suppliers. While smaller firms will be protected from excessive demands, they will still need to provide certain ESG data to maintain relationships with larger clients.
Access to Capital and Reputation: Banks and investors increasingly consider ESG factors. Companies that transparently report sustainability efforts (even voluntarily) will have an advantage in securing financing and building trust with customers and stakeholders.
Future-Proofing: Regulations may tighten again in the future. Companies that adopt best practices now (e.g., CSRD/ESRS frameworks) will be better prepared for future obligations while reaping the benefits of efficient ESG risk management.
Conclusion
The EU Omnibus initiative brings relief from some obligations, particularly for smaller companies. ESG reporting will focus on the largest firms and become simpler. Due diligence requirements will be more realistic and pose lower legal risks.
However, companies should not scale back sustainability efforts. Those that embrace best practices (like CSRD) will gain a competitive advantage and contribute to sustainable growth beyond mere regulatory compliance.