EU Taxonomy Simplified: Key Changes in the Omnibus Package 2025 Explained

The EU Taxonomy will be significantly simplified by the Omnibus Package 2025. Fewer reporting obligations, higher thresholds, and clearer guidelines will 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 changes described in this article are proposals from the EU Commission and part of the so-called “Omnibus Simplification Package.” They are still in the legislative process and must be confirmed by Parliament and Council.
The final requirements may therefore still change.

Key Potential Changes at a Glance:

• Reporting Obligation: Now only applies to companies with more than 1,000 employees and revenue over €450 million (previously: 500 employees, €40 million revenue). This substantial increase in thresholds is expected to exempt thousands of smaller companies from the reporting burden (PwC analysis).
• Reduction in Reporting Requirements: The number of companies required to report drops by 80%.
• New Materiality Threshold: Focus on relevant data from a 10% materiality level.
• Relief for SMEs: Fewer documentation and supply chain requirements.
• Partial Compliance Possible: Companies can indicate if they only partially meet the criteria.

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—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 our 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, and companies can indicate when activities only partially meet the technical screening criteria. 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 (Euractiv).

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. This reduces reporting workload by 35%, and the EFRAG-SME Standard can be used voluntarily (EFRAG).
• 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 obligations are limited to direct business partners.
• Review intervals for due diligence processes are extended from annually to every five years.

"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 Trade

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 (Financial Times). 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 (Deloitte).

An overview of the key changes:

• Materiality Threshold: Set at 10%
• Reporting Frequency: In the future, every two years
• Taxonomy Alignment: Partial fulfillment is possible

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. Particularly important is the new option to report partial compliance with the EU Taxonomy, even if not all technical screening criteria are met. This flexibility is expected to encourage more companies to engage with the taxonomy framework, even if they are not able to achieve full alignment immediately (ESG Today).

Partial compliance means that companies can still report their EU Taxonomy KPIs even if certain technical criteria (e.g., DNSH) are only partially fulfilled. This promotes transparency without fully excluding companies—but also carries the risk of diluting comparability.

In the future, credit institutions can exclude companies that no longer fall under the amended CSRD scope from the calculation of the Green Asset Ratio. This includes, for example, companies with fewer than 1,000 employees and net revenue under €50 million or a balance sheet total under €25 million.

The reduction of the CSRD scope by about 80% 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 net revenue up to €450 million can report voluntarily, while larger companies are required to do so.

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 with fewer than 1,000 employees must be excluded from the Green Asset Ratio calculation.
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—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. For a review of leading ESG reporting tools, see Gartner's ESG Reporting Software reviews.

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 500 to over 1,000 employees, combined with revenue over €450 million. This reduces the number of affected companies by 80% (European Commission).
• 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 changes will save over €6 billion in administrative costs (ESG Today).

The Commission plans to implement these changes this year and provide a preparation period.

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

ESG Omnibus Package

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—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, we summarize the key benefits and next steps.

Expected Results

The changes included in the Omnibus Package, such as the 10% materiality threshold, partial compliance, and simplified OpEx documentation, 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.

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

Companies can report even if they do not meet all technical assessment criteria. In the new reporting templates, partial compliance (“partially aligned”) can be indicated—for example, using separate columns or footnotes.

Changes through the Omnibus Package 2025

• Introduction of a 10% materiality threshold.
• Reduction of CSRD reporting scope by 80%.
• Limited documentation requirement for operating expenses (OpEx).
• Option for partial compliance.

10% Materiality Threshold

The new 10% materiality threshold applies to all three EU Taxonomy metrics: revenue, CapEx, and OpEx. Only activities exceeding this threshold must be disclosed in detail (PwC).

Simplifications Also for Voluntary Reporting Companies

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

Changes for Financial Companies

Banks and other financial companies will in future only need to include taxonomy metrics for mandatorily reporting companies in the Green Asset Ratio. Small companies are excluded.

Reporting Obligation for Subsidiaries

Subsidiaries below the new thresholds (1,000 employees / €450 million) are no longer required to report, unless they are publicly listed. However, they can be voluntarily included in group reports.

Checking the Reporting Obligation

The reporting obligation exists if at least two of the following three criteria are met in two consecutive years:

• More than 1,000 employees (FTE)
• Annual revenue over €450 million
• Balance sheet total over €250 million

Timeline

The package will come into force in 2025 and will be introduced in parallel with the CSRD with a two-year transition period (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."