The European Union is embarking on a journey to streamline and simplify its corporate sustainability rules through the proposed EU omnibus regulation. By consolidating the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy, the EU aims to reduce compliance burdens while addressing concerns over Europe’s economic competitiveness and regulatory complexity.
In November 2024, the President of the European Commission Ursula von der Leyen indicated that the European Union (EU) was considering consolidating the CSRD, CSDDD, and EU Taxonomy into one omnibus to reduce the regulatory burden for companies.
This announcement followed growing concerns over the complexity of the three rules and the time and resources it would take for companies to comply with them. In September 2024, former Italian Prime Minister Mario Draghi released The future of European competitiveness – A competitiveness strategy for Europe, a report which highlighted regulatory barriers as a primary reason for the EU’s stagnant economy.
Calls from Germany and France to simplify and postpone EU regulations soon followed. On January 17, German Finance Minister Joerg Kukies called for delaying CSRD requirements by two years and removing sectoral reporting requirements under the law. This was followed by France, who, on January 20, 2025, published a note calling for “a massive regulatory pause” in the EU, a review of legislation under negotiation, and the possible revision of previously passed legislation (including the CSRD) that may no longer be adapted to current international economic realities.
With an initial proposal expected by February 26, 2025, the omnibus will look to reduce regulatory barriers and address member country pushback by shifting scope, timelines, and compliance requirements for the three sustainability rules under one regulation.
| Sustainability Rule | What the rule does |
| Corporate Sustainability Reporting Directive (CSRD) | Requires in-scope companies to comprehensively report on their sustainability impacts, risks, and opportunities and their associated management strategies. |
| Corporate Sustainability Due Diligence Directive (CSDDD) | Requires in-scope companies to identify and address adverse human rights and environmental impacts in their operations and value chains. |
| EU Taxonomy for sustainable activities | Establishes common definitions of economic activities that are considered environmentally sustainable, with the aim to direct investment to these activities. |
What are the potential outcomes of the EU omnibus?
The EU intends for the omnibus to streamline corporate sustainability requirements and consequently reduce the compliance burden it places on companies. While its development is a political process at its core, and thus any final decisions are hard to predict, there are a few possible outcomes.
According to one Commission draft quoted by the media, the EU aims to reduce the reporting burden for larger companies by 25 percent, and for smaller businesses by 35 percent, goals which will be compared to a burden reduction baseline as recommended by the Draghi report. Actions to achieve these reductions may include better aligning data requirements with investor needs, revising compliance timelines, shifting focus to most harmful activities, amending financial metrics to not discourage investments in smaller firms, and changing obligations to be proportionate with the scale of a company’s activities.
Notably, the circulated draft also removes some reporting requirements for smaller firms within larger supply chains to better align with the original intent of legislators. Further, the draft establishes a new definition for small mid-cap firms that are bigger than SMEs but smaller than large companies (between 250 and 1,500 employees, with sales not exceeding 1.5 billion euros or balance sheet totals not exceeding 2 billion euros) to reduce reporting requirements for these firms.
Other possible changes could include introducing phasing-in of some disclosure requirements for parts of regulations making certain requirements optional to further reduce the compliance burden for companies.
Finally, the EU may choose to altogether delay compliance deadlines by 1-2 years to give companies more time to prepare.
Why should your organization proactively prepare for the EU omnibus?
No matter the final form the omnibus takes and the timelines involved, companies should continue to prepare for the EU’s corporate sustainability requirements as a means to unlock value creation and sustainability transformation across their business. Pausing preparation now risks missing out on these commercial benefits later. There is also a non-compliance risk as the final outcome cannot be fully predicted.
As your organization tracks omnibus developments and prepares for what is next, consider the following to guide your efforts.
- Sustainability disclosure is here to stay and will create a level playing field requiring transparency and standardization. A shift in compliance deadlines or scope coverage should be seen as an opportunity to prepare strong disclosures and create a competitive advantage over peers.
- Compliance deadlines for large companies are not likely to change. Therefore, all businesses within these companies’ value chains will need to comply with the omnibus even if they do not fall within its scope. Non-compliance could result in financial penalties, reputational damage, or restrictions on market access.
- Being CSRD-ready will ensure that companies are well-prepared for other emerging sustainability disclosure regulations across jurisdictions globally. There is a high degree of overlap between CSRD and the International Sustainability Standards Board’s (ISSB) rules, which form the foundation of many regulations being proposed in Asia-Pacific and other regions. By staying ahead of the curve, companies will improve their reputation and competitive advantage and position themselves as a preferred partner or vendor in the marketplace.
- Strong CSRD and EU Taxonomy performance will improve access to capital as financial firms place increasing importance on sustainability credentials.
- Preparedness for sustainability disclosures will also help companies minimize potential financial impacts and increase organizational resiliency by ensuring adequate consideration of value chain sustainability risks, while driving operational excellence and related cost savings. Further, preparedness will improve companies’ sustainability data capacities, which can help inform sustainability communications strategies.
- Doubling down on the commercial and transformational benefits of the omnibus when discussing compliance efforts with senior internal stakeholders will help build support for proactive preparation.
- Companies will ask their suppliers about their sustainability activities, thus proactively preparing for the omnibus could present future commercial opportunities within supply chains.
No matter the current debate surrounding the omnibus, companies should not lose sight of the big picture and the long-term need to shift to more sustainable methods of economic growth. Regardless of when they are implemented, robust sustainability disclosure regulations will help unlock value creation in businesses by driving organizational shifts like improved sustainability performance management, governance changes, and investment prioritization within operations or supply chains. The time to prepare for the disclosure regulations is now.
You can read more about ERM’s work on CSRD and other sustainability disclosure regulations and standards here. Please reach out to ERM to learn more about how we can support you in your disclosure efforts.
