EU to Adjust Sustainability Rules with ‘Omnibus Packages’

Since launching the Green Deal in 2019, the EU has introduced sweeping sustainability regulations, including the Taxonomy Regulation, the Corporate Sustainability Reporting Directive (CSRD), and the Corporate Sustainability Due Diligence Directive (CSDDD). These laws have imposed extensive reporting and due diligence obligations on companies operating in the EU.

However, the EU is now reconsidering some of these rules. To cut red tape and simplify regulations, the European Commission (the Commission) is acting on recommendations from the Draghi report and has proposed two Omnibus packages aimed at reducing regulatory burdens.

While businesses may welcome these changes, the move raises questions about legislative consistency and legitimacy, as the EU is now easing rules it deemed necessary just months ago. For example, the CSDDD, adopted last summer, is already up for major revisions.

What is Changing?

The two omnibus packages propose changes to:

• Sustainability reporting – making it more accessible and efficient
• Due diligence – simplifying requirements for responsible business practices
• Carbon border adjustments – strengthening the mechanism for fairer trade
• EU investment programs – unlocking new opportunities

Proposed changes to the EU Taxonomy

The Commission proposes a number of amendments with the aim to:

• Simplify the criteria and provide further guidance for businesses to determine which economic activities that qualify as sustainable.
• Enhance transparency measures to better guide investment toward genuinely sustainable economic activities.
• Reduce complexity aimed at stimulating increased participation from private-sector investors.

Proposed changes to the CSRD

The first omnibus package will bring several changes to the CSRD, with the aim to making it more proportionate and easier for companies to abide by the rules, including:

• Smaller scope – The CSRD will only apply to large companies (1,000+ employees, €50M+ turnover, or €25M+ balance sheet total), reducing affected companies by 80%.
• ‘Value chain cap’ – Limits what large companies covered by the CSRD can request from business partners outside the scope of the directive.
• Revision of the European Sustainability Reporting standards (ESRS) – The Commission aims to substantially reduce the number of data points, clarify provisions deemed unclear, and improve consistency with other pieces of legislation.
• Deletion of sector-specific standards requirement – The proposed amendments will delete the empowerment for the Commission to adopt sector-specific standards.
• No shift to ‘reasonable assurance’ audits – Sticking to current limited assurance standards.
• Postponement of reporting requirements – Large companies that have not yet started implementing the CSRD and listed SMEs (Wave 2 and 3) will get additional two years to adjust to the new rules. This to give time to the co-legislators to agree to the Commission’s proposed substantive changes.

Proposed changes to the CSDDD

The CSDDD is also proposed to get a significant overhaul:

• More time to comply – Deadline for the largest companies will be extended to 26 July 2028.
• No need to scrutinize indirect business partners – Through the proposed amendments, full due diligence with respect to the value chain beyond direct business partner will only be required where there is plausible information suggesting that adverse impacts have arisen or may arise there.
• Simplifying other aspects of sustainability due diligence requirements to avoid unnecessary complexities and costs, including by prolonging the intervals between two regular periodic assessments and updates from one year to 5 years.
• Reduced trickle-down effect – Large companies will only be able to request limited sustainability data from smaller business partners.
• Looser liability rules – Removing harmonized EU-wide civil liability requirements.
• Alignment of the requirements on the adoption of transition plans for climate mitigation with the CSRD.
• Financial services exemption – Removing the review clause that could have included financial services.

Final Thoughts: Is the EU Striking the Right Balance?

The two omnibus packages show that the EU is responding to concerns about excessive regulation. However, this sudden shift raises questions about long-term policy direction. Are these simplifications a necessary correction or a step back from sustainability commitments? Businesses will need to adapt once again—but will the rules remain stable this time?