EU Omnibus Package: Key Changes and Impacts on ESG Reporting

The EU Omnibus Package brings major changes for companies in the EU. The new rules aim to reduce bureaucracy, but also result in less ESG transparency. Here’s a quick overview of the most important changes:

• CSRD reporting obligations: Only companies with more than 1,000 employees and €450 million in revenue are required to report. Implementation for many companies postponed to 2028. Learn more about CSRD reporting obligations.
• EU Taxonomy: Voluntary reporting for smaller companies, which limits the data base. Explore EU Taxonomy and sustainability opportunities.
• CSDDD: Due diligence obligations now apply only to direct suppliers, with review intervals extended to five years.
• Relief: Large companies are expected to save 25%, SMEs up to 35% in reporting costs. However, these are rough, non-binding estimates.

What does this mean for companies? More time and less effort, but also challenges for ESG strategy and a possible weakening of transparency. Companies should continue to pursue their sustainability strategy and closely monitor developments. Implementing ESG criteria effectively is key to long-term value creation and risk mitigation.

EU Omnibus Unveiled: Key implications for CSDDD, CSRD, and EU Taxonomy

1. Key Changes and Concerns

The new package restricts the CSRD reporting obligation to companies with more than 1,000 employees and annual revenue over €450 million. This means that about 80% to 85% of previously obligated companies are no longer affected. This change poses challenges for companies, especially when adapting their ESG roadmaps and data strategies. Understanding double materiality in CSRD is crucial for adapting strategies and ensuring that both financial and sustainability impacts are considered.

Key changes at a glance:

• EU Taxonomy: Companies with less than €450 million in revenue can report voluntarily, reducing the available data base.
• CSRD: Implementation for waves 2 and 3 postponed to January 1, 2028.
• CSDDD: Due diligence obligations are limited to direct suppliers, simplifying supply chain reporting.

Additionally, the interval for reviewing the effectiveness of due diligence processes under the CSDDD has been extended from one to five years. However, experts express concerns that this extension could weaken ESG oversight and make it harder to identify emerging risks in global supply chains.

EU Trade Commissioner Valdis Dombrovskis stated:

"In short: We cannot remain competitive in a challenging world with one hand tied behind our back."

For companies that have already invested significant resources in preparing for CSRD reporting, these changes may be burdensome. In addition, stakeholders warn that the introduction of the 10% materiality threshold could make ESG metrics less comparable, potentially undermining the reliability of sustainability data for investors and regulators.

Regulatory Grey Area: Backward Step or Realism?

The Omnibus Package proposals are polarizing: While the EU Commission presents the changes as realism in the sense of reducing bureaucracy and strengthening competitiveness, stakeholders from civil society, the financial sector, and large corporations criticize a regulatory rollback that undermines transparency and sustainability standards. Avoiding greenwashing in marketing is more important than ever in this context, as reduced reporting could increase the risk of misleading sustainability claims.

Core Conflict:

1. Relief vs. Loss of Transparency
   • Realism Argument: Raising the CSRD thresholds (1,000 employees, €450 million EU revenue for non-EU companies) relieves 80% of previously obligated companies. SMEs are said to save up to 35% in reporting costs.
   • Rollback Criticism: Reducing CSDDD due diligence to direct suppliers and removing reporting obligations for listed SMEs threatens the identification of risks in global supply chains.
2. Long-term Consequences
   • Positive: Extended review intervals (5 instead of 1 year) and simplified data collection lower compliance costs in the short term.
   • Negative: Lack of sector-specific ESRS standards and voluntary taxonomy reporting complicate investment decisions and comparable ESG metrics.

Stakeholder Perspectives:

• Companies: Welcome the relief, but warn of “costly confusion” due to inconsistent standards.
• Investors: Criticize the loss of 80% of reporting companies as a threat to portfolio management.
• NGOs: Germanwatch criticizes the lack of impact analyses on the long-term benefits of sustainable business models.
• ECB: The European Central Bank has also published an opinion on the planned changes, emphasizing that harmonized and reliable sustainability data are crucial for investment, financial stability, and effective climate policy. The proposal to limit reporting obligations to companies with more than 1,000 employees is viewed critically: This could significantly reduce transparency on CO₂ emissions and ESG risks. The ECB therefore recommends including medium-sized companies (from 500 employees) in a simplified form to avoid data gaps and ensure the effectiveness of the EU sustainability framework.

Conclusion:

The proposal package is heading in the right direction but goes too far. Simplification was never in question, but a rollback of this scale only helps those who are already dragging their feet. Now it’s up to the EU Parliament to work out a real compromise. The main argument of competitiveness doesn’t hold, since China already introduced its own ESG reporting requirement last year, which will become mandatory by 2030, signaling a global trend toward greater sustainability disclosure.

2. Market-Based Adjustments

Following the regulatory changes, the focus is now on market-oriented measures to reduce practical burdens. In response to criticism of extended deadlines and limited taxonomy reporting, the Commission is relying on such instruments to accommodate companies and maintain momentum toward sustainability goals.

Lower Costs and Greater Clarity

A key point is the postponement of deadlines for complying with CSRD requirements:

This postponement gives companies more time to thoroughly prepare their ESG reporting and build the necessary systems. Mastering measuring and reporting can help companies optimize their processes and align with evolving international standards.

Impact on Business Practice

The adjustment of the EU Taxonomy through changes to delegated acts after a four-week consultation shows how flexibly the Commission is responding to challenges. A survey also found that 67% of asset owners now consider ESG “more important” or “significantly more important” than five years ago, reflecting a global shift in investment priorities. For context, OECD research highlights the growing demand for sustainable finance and transparent ESG data.

What Companies Should Do Now

Two key steps for companies:

• Continue to fulfill existing reporting obligations until the new requirements take effect.
• Continuously monitor regulatory developments.

Assessing Direct Impacts

This section looks at how the package concretely affects companies and what changes it brings.

Measurable Relief

Raising the threshold to 1,000 employees reduces CSRD obligations and reporting requirements. However, these reliefs present different challenges depending on the industry, especially for sectors with high environmental impacts.

Impact on Different Industries

The effects of the package are highly sector-dependent. In climate tech, existing wind and solar projects benefit, while new pilot projects receive less support. In building management, smart control systems can cut CO₂ emissions by up to 40%. The energy sector continues to accept transitional technologies and allows up to 250g CO₂ per kWh for gas energy. For alternative proteins, every unit invested delivers the highest emissions reductions. Read about plant-based proteins and emissions reductions—the IPCC notes that shifting to plant-based diets can significantly reduce greenhouse gas emissions.

Technological Developments

The package could either foster or slow progress. Notable examples include quantum computing (600 million tons CO₂ annually), smart building controls (−40%), and plant-based meat alternatives, which cause 91% fewer emissions compared to beef. These innovations are highlighted in Nature and IPCC reports as key levers for decarbonization.

Recommendations for Companies

Companies should continue investing in their sustainability strategy and communicate openly with stakeholders until the changes are implemented. Sustainability consulting and guidance from international organizations can support this process and help businesses stay ahead of regulatory shifts.

Key Takeaways

The direct assessment of the impacts leads to the following key points:

• Balancing bureaucracy reduction and long-term ESG transparency: Fewer reporting obligations relieve companies, but could impair transparency in environmental, social, and governance (ESG) matters. Read more on the debate over ESG transparency.
• Taxonomy focus on market-ready solutions:
  The EU Taxonomy prioritizes already established technologies such as offshore wind farms, solar plants, and green hydrogen, which are considered “environmentally sustainable” as long as they meet the six environmental objectives. For these activities, there are already clear technical assessment criteria. Explore renewable energy's role in sustainability.
• Voices from the field:
  • Anna Csonka: “The goal remains competitiveness – but does less reporting really bring relief, or does it slow necessary progress?”
  • Robert Szucs-Winkler: Medium-sized companies have postponed sustainability initiatives in favor of meeting CSRD requirements – whether these investments will pay off remains unclear.
• Technological opportunities: Advances like quantum computing, smart building controls, and plant-based meat alternatives could deliver significant emissions reductions (600 million t CO₂, −40%, −91% compared to beef). Nature: Plant-based alternatives and emissions
• More than just compliance: Sustainability reporting is not just a duty, but also a strategic tool for risk management and value creation, according to Gemma Sánchez Danes. Learn more about sustainable finance strategies.

Frequently Asked Questions about the EU Omnibus Package (FAQ)

1. Which companies will be required to report under CSRD in the future?

Only companies with more than 1,000 employees and at least €450 million in EU revenue are required to submit a sustainability report under CSRD.
For listed SMEs, there is a deadline extension to 2028/2029. In Germany, some companies with €50 million in revenue or €25 million in total assets are also affected.

2. What relief might the EU Omnibus Package bring for SMEs?

• Voluntary sustainability reporting based on simplified VSME standards.
• De minimis thresholds for the CO₂ border adjustment (CBAM): Imports under 50 tons/year are exempt. Learn more about CBAM and its implications.
• Average values permitted if exact emissions data are unavailable.

3. How do obligations under the CSDDD (Supply Chain Act) change?

• Now applies only to direct suppliers, not the entire value chain.
• Review intervals increase from annually to every five years.
• No mandatory introduction of civil liability rules.

4. What happens to sector-specific ESRS reporting standards?

• They are temporarily scrapped.
• The EU Commission is relying on general (generic) standards with fewer data points.
• Double materiality remains in place.
  Result: Less comparability between sector reports.

5. Is EU Taxonomy reporting still mandatory?

No. For smaller companies, it is voluntary, making data availability more difficult for investors.
Note: Voluntary application is still possible and strategically advisable. Read more about the EU Taxonomy.

6. When do the new rules take effect?

• After approval by the EU Council and Parliament.
• Initial changes (e.g., deadline extensions) apply from 2025, comprehensive changes from 2027/2028.
• National implementation is already underway, including in Germany.

7. Have sanctions and penalties also been revised?

Yes. The minimum penalty of 5% of annual revenue is to be abolished.
New guidelines for penalty assessment are expected by the end of 2025.

Conclusion for Companies

The EU Omnibus Package brings noticeable relief, but also introduces new risks:

Positive Aspects

• Less bureaucracy for SMEs
• Clear prioritisation of key topics in reporting

Critical Aspects

• Data gaps for companies, investors, and analysts
• Legal uncertainty risks due to removal of liability provisions
• Comparability issues due to elimination of sector-specific standards

Recommendation
Companies should:

1. Comply with existing reporting obligations through 2028
2. Plan ahead – especially for investor communication
3. Wait for the final 2025 ESRS standards to avoid duplicate work