In early 2025, the European Commission put forward a sweeping “Omnibus Simplification Package” — a legislative effort to streamline and recalibrate Europe’s sustainability and ESG regulation landscape. This isn’t a minor tweak. If adopted, the changes could reshape who reports, what they report, and how seriously the rules are enforced.
Below, we unpack the draft’s key changes, what’s driving them, and how companies should prepare.
What’s Being Changed — Core Proposals
1. Narrower Scope & Higher Thresholds
A major shift is proposed in which companies must cross higher thresholds to fall under reporting obligations. Under the draft:
- Only firms with at least 1,000 employees, or those meeting higher turnover / balance sheet criteria, would be forced to comply with the Corporate Sustainability Reporting Directive (CSRD).
- Many smaller companies that would today be in scope might be exempt or shifted to voluntary reporting regimes.
This change is designed to push roughly 80% of companies out of mandatory sustainability reporting, reducing compliance burden. Proponents argue it better aligns reporting duties with where material impacts and risks lie.
2. Delayed Timelines (“Stop-the-Clock”)
The draft includes a mechanism to postpone reporting deadlines for certain companies. In effect, firms in later waves of reporting would have extra time before they must file full disclosures. This gives businesses breathing space as new rules settle.
3. Streamlined Standards & Fewer Data Points
The European Sustainability Reporting Standards (ESRS), which govern what must be reported under CSRD, would be overhauled:
- A reduced number of mandatory data points
- Clarified boundaries between “mandatory” vs “voluntary” disclosures
- Simplification of disclosures for companies’ value chain partners, especially those under new threshold limits
In short: fewer fields to fill, tighter definitions, less complexity.
4. Revised Due Diligence Rules (CSDDD Adjustments)
The draft also targets the Corporate Sustainability Due Diligence Directive (CSDDD), which requires firms to assess risks in their operations and supply chains:
- The proposal would limit due diligence to direct operations, subsidiaries, and direct business partners (i.e., “tier-1” supply chain), rather than broader network mapping
- Some of the more stringent obligations, like mandatory climate transition plans, may be softened or made optional under certain conditions
5. Harmonisation & Alignment Across ESG Regimes
One of the package’s design goals is to harmonise thresholds, definitions, and reporting boundaries across CSRD, CSDDD, the Taxonomy Regulation, and other rules. That way, the same companies are treated similarly across overlapping EU sustainability laws.
Additionally, the draft proposes adjustments related to the EU Taxonomy and the Carbon Border Adjustment Mechanism (CBAM) to better align them with the simplified reporting structure.
Why This Is Happening — Drivers & Pressures
- Industry pushback on regulatory burden
Many companies and business groups have argued that the existing sustainability framework is overly complex, costly, and misaligned with competitive pressures — especially for smaller players. The Omnibus package responds to those concerns. - Competitiveness & flexibility
EU policymakers are keen to retain business investment and innovation in Europe by reducing red tape and giving firms more breathing space to align with regulations rather than panic to comply. - Political and legislative compromise
The draft reflects a balancing act: maintain the EU’s climate and social ambitions without overburdening firms. Different EU institutions (Commission, Parliament, Council) are pushing and pulling on how much simplification is acceptable. - Need for credible data — but with pragmatism
While ambitions remain to preserve quality and comparability of ESG data, there’s recognition that perfect data can’t come at the cost of regulatory collapse or widespread non-compliance.
What Could be at Risk (and Where Pushback Might Come)
- Transparency and investor confidence
Reducing the number of companies in scope or easing reporting requirements could weaken the availability of ESG data, undermining comparability and the ability of investors, regulators or civil society to assess corporate impacts. - Legal ambiguity and fragmentation
If certain rules are made optional or thresholds redefined, cross-member state inconsistencies or legal challenges may arise. Interpreting what counts as due diligence or material impact could become contested. - Stranded transition goals
The core purpose of sustainability legislation is to drive corporate behaviour change. If compliance becomes opt-in for many, climate, human rights, and biodiversity ambitions may slow. - Credibility risks
Observers (investors, NGOs, the public) may fear that “simplification” becomes a euphemism for rolling back accountability — especially at a time when climate urgency is still acute. - Implementation complexity
Shifting deadlines, scaling exemptions, and reworking standards midstream may create confusion and auditing challenges over transition periods.
What Companies Should Do Now — A Prep Roadmap
- Map your current state
Know whether you are currently inside CSRD or CSDDD scope and where gaps lie. - Stress-test against new thresholds
Evaluate if you would remain in scope under the proposed 1,000-employee threshold or revenue thresholds. - Prioritise core metrics & controls
Focus effort on material ESG indicators, internal data systems, and control processes to future-proof reporting — simplicity doesn’t justify sloppiness. - Engage in legislative process
Provide feedback during public consultation stages, liaise with trade or industry bodies, and track amendments introduced by Parliament or Council. - Prepare for hybrid reporting regimes
You might be required to report under existing rules and upcoming draft rules in transition phases. Plan for dual compliance. - Communicate transparently
If your reporting obligations change, be clear with stakeholders (investors, customers, regulators) about what is retained, what is voluntary, and how you will maintain accountability.
Final Take
The EU’s Omnibus draft represents a pivotal recalibration — not abandonment — of its sustainability regime. The mood is shifting: from rigid mandates toward responsive regulation that seeks balance between ambition and feasibility.
If adopted, the changes may reduce compliance strain, especially for smaller firms, while preserving core reporting for larger actors. But the success of the package will depend on details: whether material data remains intact, trust is preserved, and companies don’t use simplification as an excuse to slack on sustainability commitments.
In many ways, the Omnibus draft is a litmus test for how Europe defines responsible business in the years ahead — and how much it trusts companies to carry forward bold ESG goals under lighter oversight.