The European Union’s Omnibus legislation, particularly the Sustainability Omnibus package, marks a notable attempt to align the EU’s ambitious Green Deal objectives with the operational realities of businesses, especially small and medium-sized enterprises (SMES). The Omnibus package aims to reduce regulatory burdens, cut compliance costs, and simplify business sustainability and investment rules. While it seeks to make EU sustainability policies more practical and business-friendly, experts have raised concerns about its potential impact and the effectiveness of these simplifications. Critics warn that delayed timelines, narrowed reporting scopes, and voluntary disclosures may weaken transparency and accountability in corporate sustainability reporting. This article explains the Omnibus legislation, highlights key changes to major sustainability frameworks, and outlines how it benefits businesses. It also explores concerns that the package could weaken the EU’s leadership in environmental and climate disclosures.
What is the Omnibus legislation?
The “Omnibus package,” specifically the “Sustainability Omnibus,” is a legislative proposal from the European Commission. It aims to simplify and streamline EU rules, particularly in sustainability and EU investment programmes. This package is part of the Commission’s broader effort to reduce administrative burdens for EU businesses. The goal is to foster a more favourable business environment and boost competitiveness and growth. The proposal builds on recommendations from the Draghi report and the Competitiveness Compass.
What are the key aspects of it?
Omnibus legislation is a package of EU proposals to reduce regulatory burdens on businesses, especially SMES, while supporting sustainability and competitiveness. It targets unnecessary or overlapping rules, aiming to cut administrative burdens by 25% overall and 35% for SMES. Key changes include amendments to the CSRD (Corporate Sustainability Reporting Directive), CSDDD (Corporate Sustainability Due Diligence Directive), and CBAM (Carbon Border Adjustment Mechanism) legislation to delay or ease reporting obligations and simplify compliance for small importers.
It also proposes simplifications in taxonomy reporting and the EU investment regulation, reducing data requirements and unlocking more investment capacity. The package introduces voluntary reporting standards for companies outside the scope of CSRD to shield SMES from excessive demand. It seeks to align the EU Green Deal goals with economic competitiveness by making sustainability rules more practical and cost-effective.
What changes are made to CSRD legislation by the Omnibus package?
The Omnibus package introduces significant adjustments to the Corporate Sustainability Reporting Directive (CSRD) to ease implementation, reduce burden, and better align with the EU’s broader sustainability framework. Changes by Omnibus regulations aim to cut red tape, reduce costs (estimated €4.4B in annual savings), and support SME resilience while keeping Green Deal goals on track. Key changes for CSRD include:
- Reporting Delay: The reporting deadlines for wave 2 and 3 companies (2026–2027) have been postponed by two years.
- Narrowed Scope: This only applies to large companies with >1000 employees and either €50M+ turnover or €25M+ balance sheet. It reduces in-scope companies by ~80%.
- Voluntary SME Reporting: The introduction of a voluntary standard (based on EFRAG’s VSME) for smaller companies is now excluded. It acts as a “value chain cap” that limits data requests from larger companies.
- Simplified ESRS: Upcoming revisions will cut data points, clarify provisions, and ensure better consistency across EU regulations.
- Sector Standards Dropped: Removal of the Commission’s mandate to adopt sector-specific ESRS.
- No Reasonable Assurance: Assurance requirements will remain limited, with no shift to reasonable assurance.
- Optional Taxonomy Reporting: Companies under the new scope with <€450M turnover may report Taxonomy alignment voluntarily.
- Partial Alignment Option: Companies may report partially on EU Taxonomy progress, with standardised guidance from the Commission.
How will businesses benefit from the legislation?
Businesses will benefit from the Omnibus package in several ways:
- Reduced Administrative Burden: The Omnibus package cuts red tape by at least 25% overall and 35% for SMES, making EU rules more straightforward.
- Significant Cost Savings: Businesses are expected to save around €4.4 billion annually from CSRD and ESRS changes, with additional savings from reforms to CSDDD and InvestEU.
- Simplified Sustainability Reporting: Companies still under CSRD will have fewer data points, clearer standards, and no sector-specific requirements, making reporting more practical.
- More Pragmatic Sustainability Rules: The package responds to stakeholder concerns by making sustainability rules more proportionate, flexible, and cost-effective.
- Easier CBAM Compliance for Small Importers: Importers of less than 50 tonnes of CBAM goods per year—about 90% of all importers—are exempt from complete reporting and compliance requirements.
- Enhanced Access to Finance: InvestEU changes aim to mobilise €50 billion in new investments, improving funding opportunities for SMES and green projects.
- Stronger Focus on Competitiveness: The package reduces regulatory pressure, enabling businesses to grow, innovate, create jobs, and attract investment within the EU.
What are the benefits of Omnibus legislation for SMES?
The specific benefits for SMES of the Omnibus package include.
- Reduced scope of CSRD: All companies with up to 1,000 employees and 50 million turnovers will be outside the scope of the CSRD, significantly reducing the number of SMES directly subject to these reporting requirements. The Commission estimates that the proposal will reduce the number of companies in scope by 80%.
- Protection from excessive information requests: The package will protect SMES from excessive sustainability information requests they receive from larger companies or financial institutions within their value chains. The Commission will adopt a voluntary reporting standard (VSME) for companies out of scope, acting as a “value-chain cap” to limit the information larger companies can request.
- Simplified due diligence obligations for value chain partners: Amendments to the CSDDD will limit the information requests from large companies to their SME and small midcap business partners (up to 500 employees) to the information specified in the VSME standard unless additional information is strictly necessary. Furthermore, less frequent monitoring of due diligence measures (every 5 years instead of annually) will alleviate the burden on smaller business partners.
- Benefits under Invest EU: SMES will directly benefit from a simplified application of the SME definition and the waiver of KPIS for small transactions under the InvestEU Regulation. Reducing the frequency and content of some reports will also ease their administrative burden.
How does Omnibus affect the EU Green Deal?
The Omnibus package is designed to help achieve the objectives of the Green Deal by making the rules more effective, pragmatic, and proportionate, thereby facilitating the transition to a sustainable economy and enhancing EU companies’ competitiveness. Here’s how the Omnibus package contributes to the Green Deal:
- Aligns Sustainability with Competitiveness: Reduces regulatory burden to help companies grow while transitioning to a sustainable economy.
- Makes Rules More Practical: Simplifies complex sustainability and due diligence rules, making them easier and more cost-effective.
- Streamlines Reporting Obligations: Focuses CSRD and CSDDD on larger companies, simplifies ESRS, and introduces voluntary standards for SMES.
- Encourages Green Investment: InvestEU changes aim to unlock €50 billion for clean tech and sustainable infrastructure.
- Targets Bigger Emitters Under CBAM: This policy exempts small importers from full CBAM obligations while maintaining climate protection goals.
- Responds to Business Concerns: Addresses feedback by cutting costs and complexity, gaining stronger business support for the Green Deal.
What are the main changes to the EU Taxonomy?
The main changes to the EU Taxonomy under the Omnibus package focus on simplifying reporting requirements and reducing companies’ compliance burdens. Taxonomy reporting will become voluntary for large companies (with over 1,000 employees) and a turnover of up to €450 million, decreasing the number of firms obligated to disclose their alignment.
Companies partially aligned with the EU Taxonomy can also voluntarily report their progress, allowing recognition of their sustainability efforts. The Commission is tasked with developing delegated acts to standardise the content and format of such reporting. Additionally, draft amendments to the Taxonomy Disclosures and Delegated Acts propose simplified templates, cutting data points by nearly 70% and exempting non-material activities (under 10% of turnover, CapEx, or assets) from eligibility and alignment assessments.
For financial institutions, changes to key performance indicators like the Green Asset Ratio (GAR) will allow banks to exclude exposures to companies outside the CSRD scope. The Commission also seeks feedback on two options to simplify the complex “Do No Significant Harm” criteria for pollution prevention and chemical use.
What are the main changes to CBAM?
The proposed changes to the EU’s Carbon Border Adjustment Mechanism (CBAM) aim to simplify business processes and reduce administrative burden. A key change is the exemption of small importers, mainly SMES and individuals, who import less than 50 tonnes of CBAM goods annually (equivalent to around 80 tonnes of CO₂ emissions), relieving them of any CBAM obligations.
For importers still within the scope, the revisions will streamline compliance by simplifying reporting requirements, emissions calculations, declarant authorisation, and financial liability procedures. Additionally, the changes strengthen enforcement through enhanced anti-abuse measures and a coordinated anti-circumvention strategy with national authorities, ensuring the CBAM remains effective and fair.
Why are sustainability experts concerned about Omnibus legislation?
While the EU’s Omnibus package is praised for cutting red tape and boosting competitiveness, many experts warn it may come at the cost of sustainability and integrity. Critics argue that delaying reporting obligations, significantly narrowing the scope of CSRD, and replacing binding requirements with voluntary standards for SMES could weaken transparency and accountability across EU markets.
Environmental and sustainability professionals worry that such measures might reduce the reliability and comparability of sustainability disclosures, making it harder to track real progress and spot greenwashing. Removing sector-specific reporting standards, limited assurance requirements, and relaxed due diligence obligations may signal that climate and ESG ambitions can be scaled back for convenience, threatening the EU’s role as a global leader in sustainable finance.
In short, experts are asking, can we afford to weaken disclosure frameworks to ease business compliance, or are we risking long-term credibility and climate commitments?
The EU’s Omnibus legislation represents a pragmatic shift in sustainability policymaking, aiming to balance environmental ambition with economic competitiveness. By simplifying key regulations such as the CSRD, CSDD, Taxonomy, and CBAM and offering more flexibility to SMES, the package supports the Green Deal while fostering a more business-friendly environment.
However, critics argue that in the effort to reduce administrative burdens, the Omnibus package risks diluting core sustainability and climate transparency goals. Delays in reporting timelines, narrowed scopes, and voluntary disclosures may lead to weakened accountability, less comparable data, and reduced pressure on companies to act on climate risks. While the intent is to make sustainability more practical and accessible, experts warn that these compromises could undermine the EU’s leadership in corporate transparency and slow the pace of the green transition. Whether this legislative turn proves to be a smart recalibration or a step back remains a pressing question for policymakers, businesses, and civil society alike.
