04 Mar 2025

Perspective Preferred by Nature news

Sustainability Omnibus package explained

By Preferred by Nature

On 26 February 2025, the European Commission adopted a package of proposals aimed at simplifying EU rules. The first of these ‘Omnibus' packages seeks to streamline sustainability legislation by introducing changes to multiple regulations through a single legal process.

At first glance, the package appears to offer relief for businesses, particularly smaller enterprises. Yet, critics warn that this so-called simplification may come at a steep cost, potentially weakening corporate accountability measures that have taken years to develop and are instrumental in driving environmental and social progress.

Several key laws are affected, including the EU Corporate Sustainability Reporting Directive (EU CSRD) which sets mandatory sustainability reporting obligations for companies, and the EU Corporate Sustainability Due Diligence Directive (EU CSDDD), which requires companies to establish a due diligence system to tackle adverse human rights and environmental impacts resulting from activities within their value chains.

See the specifics on the changes proposed to these laws in the Omnibus Package here.

The Omnibus package proposes significant changes to the EU CSRD, narrowing the scope of companies required to report and limiting obligations to only the largest EU companies. This would reduce the number of companies subject to reporting obligations by 80%. It also delays reporting obligations for companies that were initially required to comply from 2026 onwards. The Commission has also committed to substantially cut the number of required reporting data points and has abandoned sector-specific reporting standards.

In the case of the EU CSDDD, the Omnibus package delays key deadlines, pushing the first phase of application to July 2028 for the largest companies. It reduces or modifies many elements of the directive, including requirements for stakeholder consultations, the scope of risk assessments, the requirement to terminate business relationships as a last resort, and civil liability provisions for companies, among others.

Other impacted regulations include the EU Taxonomy, the EU’s classification system, developed to help companies and investors identify ‘environmentally sustainable’ economic activities for sustainable investment decisions. Additionally, the Carbon Border Adjustment Mechanism (EU CBAM) has been modified. This law seeks to put a fair price on the carbon emissions of imported goods to encourage cleaner industrial production in non-EU countries.

The Commission has described how the proposed Omnibus will reduce complexity in EU sustainability requirements for all businesses, particularly SMEs. The proposal shifts the regulatory focus towards the largest companies, which are likely to have a bigger climate and environmental impact.

What is behind these changes?

The European Commission’s new political cycle has kicked off with a sharp turn towards economic well-being and ensuring the EU’s global competitiveness. This is illustrated in some key documents published in the last few months, which have served to set a new direction for EU action.

The ‘Draghi report’, published in September 2024 examined the future of European competitiveness and the challenges businesses face in the EU market. It provided concrete recommendations to put Europe on a different economic pathway. Building on this, the Commission presented its ‘Competitiveness Compass’, a major initiative providing a strategic framework to steer the Commission's work in the new administration. The framework brought home the new focus on competitiveness and the streamlining regulatory burdens in the EU region. It requires a concerted effort to cut the administrative burden for businesses by at least 25% and by at least 35% for SMEs.

The Omnibus proposal claims to generate estimated annual savings of EUR 4.4 billion through changes to the EU CSRD and CSDDD, among other measures. However, by prioritising immediate savings over longer-term environmental and social gains, there are concerns the proposal risks undermining the stability of the regulatory framework for sustainability, that would otherwise help foster positive business practices. Without this stability, progress can stall and competitive advantages may be lost.

What happens next?

The Omnibus proposal will now be submitted to the European Parliament and the Council for their consideration and adoption. Any final agreed changes to the EU CSRD, EU CSDDD and EU CBAM will take effect once these bodies finalise negotiations and the amendments are published in the EU’s Official Journal.

For the EU Taxonomy, the Commission will first gather public feedback before adopting a final version of the proposed amendments. This process will affect several components of the Taxonomy Regulation, including the Taxonomy Disclosures Delegated Act, Taxonomy Climate Delegated Act and the Taxonomy Environmental Delegated Act.

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