EU Taxonomy Simplified: Key Changes in the Omnibus Package Explained

The EU Taxonomy has been significantly simplified by the Omnibus package (Directive (EU) 2026/470) and Delegated Regulation (EU) 2026/73. Fewer reporting obligations, higher thresholds, and clearer guidelines ease the burden on many companies, especially SMEs in Germany. According to the European Commission, these reforms are designed to address widespread concerns about regulatory overload and to foster a more business-friendly environment, particularly for smaller enterprises (source).

Note: The scope changes are final: Directive (EU) 2026/470 entered into force on 18 March 2026. The simplified taxonomy templates and the 10% materiality threshold come from Delegated Regulation (EU) 2026/73, applicable since 1 January 2026 and optional for financial year 2025.

Key Changes at a Glance:

• Reporting Obligation: Now only applies to companies with more than 1,000 employees and revenue over €450 million (previously: more than 250 employees, €50 million revenue or €25 million balance sheet total, two of three criteria). This substantial increase in thresholds is expected to exempt thousands of smaller companies from the reporting burden.
• Reduction in Reporting Requirements: Most previously reportable companies fall out of scope. The Commission's estimate of around 80% referred to its February 2025 proposal; there is no official figure for the adopted thresholds.
• New Materiality Threshold: Activities that together stay below 10% of turnover, CapEx or OpEx do not have to be assessed for taxonomy alignment (Delegated Regulation (EU) 2026/73).
• Relief for SMEs: Fewer documentation and supply chain requirements.

These changes significantly reduce bureaucratic effort and allow companies to focus more on their core activities. At the same time, EU-wide ESG regulations are intended to become more resilient to geopolitical pressure and transatlantic regulation to by focusing more on risk materiality and efficiency rather than mere rule-following. This approach aligns with global trends toward outcome-based sustainability reporting, as highlighted by the OECD (source). For more on implementing ESG criteria, see my beginner's guide to sustainability.

Main Changes in the Omnibus Package

Simplified Reporting Rules

New reporting templates make requirements easier for both financial and non-financial companies. The “Do No Significant Harm” (DNSH) requirements are more clearly defined, and a materiality threshold helps focus on relevant metrics. Reporting obligations for operational expenditures are limited. These changes lay the groundwork for simpler rules for small and medium-sized enterprises (SMEs). Learn more about ESRS standards and reporting guidelines. Notably, the DNSH principle, which ensures that economic activities do not significantly harm environmental objectives, has often been cited as a complex hurdle for companies. The new clarifications are expected to streamline compliance and reduce ambiguity (Delegated Regulation (EU) 2026/73).

Live data: the Fiegenbaum Atlas provides green bond volumes, CSRD benchmarks, EU ETS prices, updated automatically. Open the dashboard.

New Rules for SMEs

For SMEs in Germany, this brings the following changes:

• Companies with fewer than 1,000 employees or revenue below €450 million are exempt from the reporting obligation. They can use the voluntary VSME standard.
• Information obligations along the supply chain are reduced to avoid disproportionate requirements.

Additionally, documentation requirements are significantly reduced, which is particularly relevant for SMEs that often lack the resources for extensive compliance teams.

Updated Documentation Requirements

Documentation and audit requirements have been adjusted to reduce effort and costs:

• DNSH requirements and assurance obligations are lowered.
• Due diligence under the CSDDD follows a risk-based approach: not every impact has to be mapped, and where risks are equally high, direct business partners may be assessed first.
• Under the CSDDD, periodic reviews of due diligence measures move from annually to every five years; this applies only from 26 July 2029 and only to companies with more than 5,000 employees and more than €1.5 billion turnover.

"Put simply, we cannot hope or expect to successfully compete in a perilous world with one hand behind our backs." - Valdis Dombrovskis, European Commissioner for Economy and Productivity, Implementation and Simplification

The adjustments to the EU Taxonomy are part of the broader EU competitiveness agenda, with which the Commission is responding to criticism that European companies are overburdened by excessive regulation. The goal is to align ESG requirements with economic resilience and digital transformation. For guidance on unlocking ESG value, see unlocking ESG value for startups and VC.

ESG Strategy Changes for German Companies

Updated Compliance Steps

With the revised documentation requirements comes the improvement of compliance processes. Companies with more than 1,000 employees and annual revenue over €450 million are still required to provide EU Taxonomy KPIs. This shift is expected to allow larger companies to focus on more meaningful sustainability metrics while reducing administrative overhead for smaller firms.

An overview of the key changes:

• Materiality Threshold: Set at 10%
• Reporting Frequency: Unchanged, annually with the sustainability statement
• Taxonomy Alignment: No separate “partially aligned” category; an activity is aligned or only eligible

The new reporting templates make data management much easier. Companies should adapt their data processes to the updated ESRS requirements and integrate external data sources to close any information gaps. According to CDP, leveraging digital solutions and external benchmarks is increasingly seen as best practice for ESG data management.

Adapting the Business Model

In addition to compliance requirements, the Omnibus Package also brings the need to adapt business models. A separate reporting option for partial alignment, as the Commission proposal envisaged, is not part of the adopted Directive (EU) 2026/470. If an activity does not meet all technical screening criteria, it is still reported as taxonomy-eligible but not taxonomy-aligned.

Credit institutions must exclude exposures to companies outside the amended CSRD scope from the denominator of the Green Asset Ratio. This includes, for example, companies with no more than 1,000 employees or no more than €450 million net turnover. Exposures to companies that report voluntarily, or with a known use of proceeds, may be included.

Does the 10% threshold apply to banks? Not the same one. The threshold for turnover, CapEx and OpEx applies to non-financial undertakings. Credit institutions, asset managers, investment firms and insurers have their own 10% derogations in Delegated Regulation (EU) 2026/73, covering only exposures whose use of proceeds is known, fee and commission income or premiums that together stay below 10% of the relevant KPI; these amounts are reported separately as non-material. A credit institution whose activities covered by these KPIs generate less than 10% of its total net turnover may omit the Annex V KPIs altogether. On top of that, exposures to undertakings outside the CSRD reporting obligation are excluded from the Green Asset Ratio denominator, and the trading book and fees and commissions KPIs only apply from 1 January 2028 (Delegated Regulation (EU) 2026/73, Art. 1(3), (6) and (8)).

The much smaller CSRD scope makes it possible to focus on the core aspects of sustainability. This results in several advantages, including:

• Focus on relevant taxonomy activities
• More efficient use of resources
• Better data quality through more targeted collection

In the next section, you’ll learn how to implement these new requirements in practice.

Implementation Guide

Implementation Steps

First, companies should check whether they fall under the amended CSRD scope. Companies with no more than 1,000 employees or no more than €450 million net turnover can report voluntarily; companies above both thresholds are required to report.

The implementation process can be divided into three main phases:

1. Preparation Phase
   Analyze your current reporting processes and identify where adjustments are needed. Take the materiality threshold into account during the preliminary analysis.
2. Adjustment Phase
   Revise your data management systems and reporting workflows. For credit institutions, this means, for example, that exposures to companies outside the CSRD reporting obligation must be excluded from the Green Asset Ratio denominator.
3. Implementation Phase
   Train your employees and implement the revised processes.

These steps help integrate the EU Taxonomy into your corporate strategy and enable long-term automation and monitoring. Specialized tools for automation and KPI calculation can be a great support to more on this in the next section.

Tools and Data Analysis

After completing the implementation phases, specialized software solutions can make the process more efficient. They offer features such as:

• Automated creation of reports, taxonomy assessments, and KPI calculations (e.g., revenue, CapEx, OpEx)
• Integration of ESG data into existing IT systems

Using such tools makes ongoing progress monitoring easier, ensuring both data quality and compliance with requirements. More details on this in the progress monitoring section.

The background is in ESG Reporting Software Costs in Germany: How to Compare Vendor Quotes.

Progress Monitoring

Progress monitoring should be based on the implemented tools. An effective methodology includes:

• Quarterly review of the completeness and quality of ESG data
• Regular assessment of compliance with taxonomy requirements
• Adjustment of processes in response to new regulatory requirements
• Integration of sustainability metrics into performance management

"The collaboration saved us a lot of effort because the topic would have been too new, complex, and extensive to tackle without external professional expertise. This hurdle would have been too high otherwise."

The postponed deadlines give companies the opportunity to establish stable disclosure practices, which can also be leveraged as a competitive advantage.

Change Overview: 2024 vs. 2025

Comparison of Reporting Obligations

The differences in reporting obligations between 2024 and 2025 show clear practical impacts. Here are the most important changes summarized:

• Companies Required to Report: The threshold rises from 250 to over 1,000 employees, combined with revenue over €450 million. This removes most previously affected companies from scope; the Commission's estimate of around 80% (European Commission) referred to its February 2025 proposal.
• Scope of Reporting: Switch to simplified templates that make the process more transparent.
• Materiality: Introduction of a 10% materiality threshold, allowing for clearer delineation.
• Documentation Requirements: Requirements, especially for OpEx reporting, are significantly reduced.
• Administrative Relief: The Commission estimated annual administrative savings of around €6.3 billion for its February 2025 proposals as a whole (European Commission).

Both acts have been adopted: Directive (EU) 2026/470 has been in force since 18 March 2026, Delegated Regulation (EU) 2026/73 applies since 1 January 2026.

These figures form the basis for the next steps in implementation and monitoring.

Criticism of the Simplifications

Although the relief for SMEs and large companies is widely welcomed, there are also critical voices. NGOs and academics fear that raising the thresholds and reducing OpEx reporting requirements could lead to the loss of key sustainability information. For example, the European Environmental Bureau has warned that the changes may weaken the EU’s ability to track progress toward its climate goals (EEB).

There is also debate over whether the introduction of a 10% materiality threshold will actually improve data quality to or whether it will serve as a gateway for “greenwashing-friendly” omission of inconvenient facts. For insights on avoiding greenwashing, see how to avoid the trap of greenwashing marketing. Academic research has highlighted the risk that materiality thresholds, if not properly defined and audited, could be exploited to underreport negative impacts (ScienceDirect).

Conclusion

After comparing the reporting obligations, here are the key benefits and next steps.

Expected Results

The 10% materiality threshold and the simplified OpEx assessment from Delegated Regulation (EU) 2026/73 help focus reporting on what matters most. This is expected to increase efficiency and reduce costs for companies, while maintaining a high level of transparency for stakeholders.

Action Plan

Based on these changes, the following steps could be useful:

1. Check the Thresholds
   Analyze whether your company exceeds the new thresholds (more than 1,000 employees, over €450 million revenue).
2. Adjust Reporting
   Use the simplified templates and reduce the data points collected.
3. Create an Implementation Plan
   Set clear milestones, responsibilities, and timelines for adapting your processes and systems.
4. Consider Voluntary Reporting
   Companies below the thresholds should consider whether voluntary ESG reporting according to the simplified standards could offer strategic advantages.
5. Optimize Internal Processes
   Streamline your workflows and integrate ESG reports into your overarching corporate strategy.

Timeline and Implementation Roadmap: When Do Changes Take Effect?

The Omnibus Package was formally proposed by the European Commission in February 2025, with phased implementation designed to give companies adequate preparation time. The revised EU Taxonomy reporting obligations are set to apply progressively: companies already reporting that exceed both new thresholds continue, Member States may exempt those below them for financial years 2025 and 2026, and companies newly in scope start with financial year 2027. There is no rollout for mid-sized enterprises below the thresholds. These staggered deadlines reflect lessons learned from the initial CSRD rollout, where compressed timelines created significant compliance pressure.

For the detail, see CSRD vs NIS2: EU Compliance Guide for Cybersecurity & Reporting.

For companies operating in Germany, the CSRD scope changes still have to be transposed into national law by 19 March 2027. The taxonomy simplifications need no transposition: Delegated Regulation (EU) 2026/73 is directly applicable since 1 January 2026, with the old rules optional for financial year 2025. Staying current with these legislative milestones is essential for accurate internal planning.

Practically speaking, compliance teams should map each deadline against their existing reporting calendar. Companies that proactively updated their data collection processes in 2025 are now better positioned to meet the 2026 requirements without costly last-minute adjustments. A clearly structured internal roadmap, covering data gaps, stakeholder training, and system upgrades, remains the most reliable tool for navigating the transition smoothly.

Impact on Specific Industries: Manufacturing, Finance, Retail, and Technology

The Omnibus simplifications affect different sectors in distinct ways. For manufacturing companies, the revised technical screening criteria reduce the documentation burden around substantial contribution thresholds, particularly for energy-intensive processes. Manufacturers must still demonstrate alignment with the Do No Significant Harm (DNSH) principle and the minimum safeguards.

In the financial sector, asset managers and banks face updated requirements for disclosing the taxonomy alignment of their portfolios. Exposures to undertakings outside the CSRD scope drop out of the green asset ratio denominator, and the trading book and fees and commissions KPIs only apply from 1 January 2028.

Technology firms, particularly those providing cloud infrastructure or data center services, should check their activities against the existing technical screening criteria for data centres under the climate change mitigation objective. Across all industries, the overarching message is consistent: the simplifications reduce administrative friction without fundamentally lowering environmental ambition, meaning genuine sustainability performance remains the core expectation.

The background is in Green SaaS: Building Lightweight Climate Tools with APIs and AI.

FAQ

Here you’ll find a compact overview of the most important points regarding the EU Taxonomy and the Omnibus Package 2025.

Basics of the Taxonomy and Reporting Obligations

• A system for classifying environmentally friendly economic activities as part of the European Green Deal (European Commission).
• Reporting obligation applies to companies with more than 1,000 employees and revenue over €450 million. For all other companies, reporting is voluntary.

Partial Compliance in the EU Taxonomy

A separate label for partially aligned activities was part of the Commission proposal for the Omnibus package but is not included in the adopted Directive (EU) 2026/470. If an activity does not meet all technical screening criteria, it is reported as taxonomy-eligible but not taxonomy-aligned.

Changes through the Omnibus Package 2025

• Introduction of a 10% materiality threshold (Delegated Regulation (EU) 2026/73).
• Much smaller CSRD reporting scope (more than 1,000 employees and more than €450 million net turnover).
• Limited documentation requirement for operating expenses (OpEx).

10% Materiality Threshold

The 10% materiality threshold applies separately to turnover, CapEx and OpEx: activities that together stay below 10% of the denominator of the respective KPI do not have to be assessed for taxonomy eligibility or alignment. They are reported separately as non-material. If OpEx is not material for the business model at all, the OpEx assessment can be omitted by disclosing the denominator and explaining why (Delegated Regulation (EU) 2026/73).

Simplifications Also for Voluntary Reporting Companies

Companies below the thresholds can also use the simplified reporting templates. This offers strategic advantages and reduces the effort for voluntary ESG reporting.

Changes for Financial Companies

Banks and other financial companies exclude exposures to companies outside the CSRD reporting obligation from the denominator of their KPIs, such as the Green Asset Ratio. Financial companies have their own 10% derogations, not the threshold for turnover, CapEx and OpEx.

Reporting Obligation for Subsidiaries

Subsidiaries below the new thresholds (1,000 employees / €450 million) are no longer required to report, whether listed or not. However, they can be voluntarily included in group reports.

Checking the Reporting Obligation

The reporting obligation exists if both criteria are met (Directive (EU) 2026/470):

• More than 1,000 employees on average over the financial year
• Net turnover over €450 million

Timeline

Directive (EU) 2026/470 has been in force since 18 March 2026, and companies newly in scope report from financial year 2027. The simplified taxonomy disclosure templates have applied since 1 January 2026 under Delegated Regulation (EU) 2026/73 (European Commission).

Tools and Support

• EU Taxonomy Navigator: Tools and guides for orientation.
• EU Taxonomy Compass: Visualization of requirements (EU Taxonomy Compass).
• EU Taxonomy Calculator: Support for KPI calculation.
• Additional Resources: FAQ database, beginner’s handbook, and NACE mapping table.

"The collaboration saved us a lot of effort because the topic would have been too new, complex, and extensive to tackle without external professional expertise. This hurdle would have been too high otherwise."