On 27 February 2025, the European Commission presented its Simplification Omnibus Package proposal. In an unprecedented move, existing legislation has been revised to align with the Commission's new approach aimed at fostering the competitiveness of European businesses while unlocking investment capacity and cutting administrative burden on companies.
This reform follows years in which the EU led the way in climate and ESG-friendly policies. The Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) underwent lengthy and intense policymaking processes before finally coming into effect in January 2023 and July 2024, respectively. During this period, the EU strongly encouraged corporations to align with the Paris Agreement objectives, promoting corporate accountability and sustainability standards that were expected to create a competitive advantage for EU companies.
However, within just two months of the new Commission's mandate, both regulations have come under scrutiny, leading to their inclusion in the simplification effort that was included in an omnibus package. Critics of the CSRD have raised concerns about the complexity of sustainability reporting, excessive administrative burdens, data collection requirements, and high compliance costs. For the CSDDD, the primary issues revolved around civil legal liability, the scale of potential penalties, and complexities in supply chain responsibilities.
This omnibus proposal aligns with Mario Draghi’s report on competitiveness, emphasizing the urgency of addressing decarbonization while strengthening the global competitiveness of EU businesses.
Where Do We Stand Today?
CSRD, CSDDD, and EU Taxonomy remain in force for the time being : The first CSRD reports are already being published, and some countries have fully transposed the directive.
Double materiality assessments and climate transition plans remain mandatory.
The Omnibus is the beginning of a new policy process: The proposal must undergo the standard legislative process, with discussions in the European Parliament (EP) and Council. Fast-tracking procedure is anticipated ( and to be ideally concluded in April) - which aims to temporarily suspend certain reporting rules while the rest of the bill is negotiated.For EU companies, this represents a "wait and see “ ( stop the clock) moment as the EP and Council shape the final version of the proposal.
Key Announced Changes to CSRD and CSDDD
Corporate Sustainability Reporting Directive (CSRD)
Scope reduction: 80% of companies will be excluded from CSRD sustainability reporting obligations.
Mid-cap companies removed: Reporting requirements will apply primarily to larger companies.
Substantially fewer data points required.
Sector-specific standards have been scrapped
Postponement: Reporting requirements delayed by two years for companies not yet reporting.
Limited assurance
Corporate Sustainability Due Diligence Directive (CSDDD)
Narrowed scope: Only Tier 1 suppliers (most significant suppliers) will be affected.
Removal of the requirement for climate transition plans.
Elimination of civil liability enforcement.
Further one-year delay in implementation.
Financial penalties no longer based on global turnover.
EU Taxonomy
Applies only to large companies (those with more than 1,000 employees and over €450M in turnover).
Materiality thresholds introduced for reporting – measure widely welcome by most sides
Simplified reporting: Two-thirds of reporting tables removed.
"Do no significant harm" principle simplified, particularly for pollution prevention and control.
CBAM
Introduction of a de minimis threshold that will exempt 90% of the current importers of CBAM covered goods.
those remaining in scope will cover approximately 99% of embedded emissions in CBAM covered goods.
Key Considerations for Board Members
Remain calm: The process has generated significant noise, and heavy technical discussions. It is crucial however to stay informed about developments. The European Commission has made its proposal, but it must still pass through the EP and Council before becoming law. EP will use a fast track approach to provide guidelines for companies due to report CSRD this year. The final version, likely different from the current draft, will not be fully known until 2025. With the postponements already announced, businesses have around two years to adapt.
Avoid hasty decisions: This is the beginning of the process, not the conclusion. Further changes are likely to be put on the table. Focus on value creation and ensuring quality data for risk and opportunity management.
To publish or not to publish? Some large companies have already prepared their first CSRD reports for 2025. They must now decide whether to proceed with publication or adopt a "wait and see" approach.
Sustainability goes beyond reporting: The debate shifts from compliance to strategy. How deep is your company's commitment to sustainability? Should you pause and reassess, or continue advancing transition efforts despite a lighter reporting burden? Some investors may still require sustainability disclosures, regardless of regulatory changes.
Are These Changes Favorable for Businesses?
Business opinions were divided: Some support scrapping aspects of the legislation, while others advocate for simplification without deregulation.
Rapid regulatory shifts challenge legal predictability: The EU is becoming more reactive, as well seen in recent moves to scale back CBAM (Carbon Border Adjustment Mechanism) and postpone the EU Deforestation Regulation (EUDR).
Impact on ESG and corporate behavior: The original intent of these regulations was to align sustainability reporting with financial reporting standards and ensure responsible corporate behavior across global value chains. While simplification will benefit most businesses, it also introduces a less granular approach to risks and exposures.
Impact on early adopters: Companies that invested in compliance early may feel penalized, but the delay also offers additional preparation time and the opportunity to refine reporting for better decision-making.
The role of ESG data in the global economy: ESG data remains a pillar for transition and resilience strategies and for ESG investor’s confidence. The EU’s shift contrasts with China, which implemented its own ESG reporting framework in 2024.
Areas to Monitor Closely
Mid-cap exclusion: This could be contested by Member States in Council debates.
Impact on national transpositions: Some countries, such as Belgium, have already transposed CSRD into law (November 2024). The legal implications of these changes remain unclear.
EU Taxonomy's voluntary nature: Will this dilute its effectiveness in creating a level playing field?
Ripple effects on other EU regulations: Potential impacts on the Batteries Directive, Forced Labor Regulations, and Critical Raw Materials Act
Paves the way for stronger focus on Clean Industrial Deal and Competitiveness Compasss
Complexity of simplification: Some measures may introduce new complexities rather than resolving existing challenges. ( eg the legal aspects of CSDDD)
Consultation on EU Taxonomy: Open for contributions until 26 March 2025 (EU Commission consultation).
Regulatory predictability remains uncertain through 2025.
Companies urgently need clarity and legal certainty regarding whether they must continue preparing for the implementation of their due reporting obligations. The Omnibus proposal marks a significant shift in the EU's approach to ESG regulations. While simplification may reduce administrative burdens, it also introduces uncertainty, particularly for businesses that have already committed to compliance. Boards must remain vigilant, strategic, and prepared for further clarifications on the regulatory developments.