What is the EU Omnibus Simplification Package?
This is a recent legislative initiative from the European Commission released on 26 February 2025, aimed at streamlining and simplifying existing sustainability reporting requirements and the due diligence framework. It’s a direct response to criticisms about the scale, complexity, and cost of compliance associated with recent EU Green Deal legislation. Some see it as an effort to make sustainability regulations more manageable while still pursuing the EU’s green ambitions.
Why should your business care?
Whether you’re a large corporation or a smaller enterprise, these proposed changes could significantly impact your obligations and how you approach sustainability. The Package intends to reduce compliance burdens, potentially taking many companies out of the mandatory scope of certain regulations. This could mean reduced administrative costs and more time to focus on strategic initiatives. However, it also raises questions about the future of sustainability reporting and due diligence, and how businesses will maintain transparency and meet stakeholder expectations. Staying informed is crucial to understand potential cost savings, changes in reporting requirements, and the evolving landscape of sustainability in the EU.
Key High-Level Changes and Clarifications:
Let’s break down some of the most important proposed changes based on the key pieces of legislation involved:
- Corporate Sustainability Reporting Directive (CSRD): This directive mandates comprehensive reporting on environmental, social, and governance (ESG) impacts. The Omnibus Package proposes significant adjustments:
- Company Size and Revenue Thresholds: The thresholds for being classified as a large undertaking and thus likely falling under mandatory CSRD have been significantly raised. For EU and EEA companies, the new threshold is >1,000 employees AND either >EUR 50m turnover OR >EUR 25m balance sheet (up from >250 employees). For non-EU companies, the threshold for turnover generated in the EU is raised to >EUR 450m (up from >EUR150m), while the >250 employee threshold for large subsidiaries remains. This means many more companies, especially listed SMEs, could be removed from the mandatory reporting scope.
- “Value Chain Cap”: This introduces a limit on the information that reporting entities can request from businesses in their value chain that fall below the revised CSRD thresholds. The information requested cannot exceed what is disclosable under a newly developed set of voluntary standards based on the current VSME (voluntary small and medium-sized enterprises) standards. This aims to reduce the burden on smaller entities within the supply chain.
- ESRS (European Sustainability Reporting Standards): These are the standards that companies use to report their sustainability information under the CSRD. The Omnibus Package proposes to revise the ESRS to reduce the number of mandatory data points, clarify provisions, and improve consistency with other legislation. While the first set of ESRS remains applicable, these revisions aim to simplify the reporting process.
- Postponed Implementation: The reporting timelines for the current Wave 2 (originally FY2025) and Wave 3 (originally FY2026) are proposed to be postponed by two years. The goal is that many of these companies will ultimately be taken out of scope entirely.
- Corporate Sustainability Due Diligence Directive (CS3D): This directive requires companies to identify, prevent, mitigate, and account for human rights and environmental impacts in their operations, subsidiaries, and value chains. Proposed changes include:
- Delayed Application: The application timelines are proposed to be delayed by one year to July 2028.
- Focus on Direct Business Partners: Due diligence assessments will generally be limited to direct business partners (Tier 1 suppliers) unless there is “plausible information” about adverse impacts involving indirect partners.
It’s important to remember that these are proposals and are subject to further negotiation and potential amendments by the European Parliament and the Council of the EU.
What should businesses do?
Monitor the progress of the Package through the EU legislative process and be aware of potential national-level sustainability reporting requirements. Even if your company falls below the new mandatory thresholds, understanding these developments is crucial for engaging with stakeholders, maintaining competitiveness, and preparing for potential future regulations.
To discuss your sustainability reporting needs, feel free to contact me and we will draft a plan on how to achieve them.
