EU Omnibus Package: Deregulation or De-bureaucratisation?

The EU Commission has proposed extensive simplifications to sustainability reporting requirements, removing around 80% of companies from the scope of application.

1. CSRD

The Corporate Sustainability Reporting Directive (CSRD) will only apply to companies that meet the following criteria:

• More than 1,000 employees and
• More than €50 million in annual turnover or
• A balance sheet total of €25 million.

Companies that would have been required to report in 2026 and 2027 (the so-called second and third waves) will now only need to comply from 2028. Similarly, the scope of the Corporate Sustainability Due Diligence Directive (CSDDD) will also be aligned with this 2028 implementation date.

The Commission is working on voluntary reporting standards for companies now excluded from the CSRD’s scope. These will impose significantly lower requirements and will be based on the SME standards (VSME) developed by EFRAG. CSRD-reporting companies will not be allowed to request additional sustainability information from non-CSRD-reporting suppliers beyond what is covered by the voluntary reporting standards, reducing the so-called "trickle-down effect".

Furthermore, the Commission plans to revise the delegated act defining the European Sustainability Reporting Standards (ESRS) to drastically reduce the number of data points and improve coherence with other regulations. Sector-specific standards and standards for appropriate security will also be removed.

However, the Commission is maintaining all other key aspects of the CSRD, particularly the concept of double materiality analysis.

2. CSDDD

The simplifications to the Corporate Sustainability Due Diligence Directive (CSDDD) focus on assessing only direct business partners rather than the entire supply chain. Business partners that qualify as SMEs or mid-caps (with fewer than 500 employees) will also be exempt from the trickle-down effect if they voluntarily follow the CSRD’s VSME standards. Furthermore, the proposals include the removal of civil liability provisions.
 

3. EU Taxonomy

CSRD-reporting companies will only be required to report under the EU Taxonomy if they have more than 1,000 employees and €450 million in turnover. Below these thresholds, reporting will be voluntary. Additionally, an economic activity will only be relevant for EU Taxonomy assessment if it accounts for more than 10% of the company’s total turnover.
 

4. Green Asset Ratio

Financial institutions will be allowed to exclude companies that are no longer within the revised CSRD scope from the denominator when calculating their Green Asset Ratio for risk assessment purposes.

The Criticism

Criticism has come swiftly. Many stakeholders have described the proposals as a true deregulation that would ultimately undermine the ambitions of the Green Deal. Are they right? Perhaps. However, they may be overlooking the political context: A more proportionate approach to CSRD requirements, clearer guidance, and extended transition periods would have been preferable. However, any deeper amendments would have triggered a lengthy political process with an uncertain outcome, especially given the EU’s shifting political landscape. Politically, taking that risk was not viable.
 

Our Assessment

Reducing unnecessary bureaucracy for SMEs is a much-needed step—job done! But what is unnecessary, and what remains crucial? Sustainability reporting is seen as a challenge. The proposals offer opportunities but also risks that need better balancing:

1. Opportunity: Only climate-neutral business models are future-proof!
   The EU’s and the UK’s climate goals remain unchanged. Rising CO₂ prices and global competition will put every business model to the test in the near future. Companies should reinvest the resources and time saved from reduced reporting requirements into transformation initiatives that secure their future viability. Legislative incentives, such as the newly introduced €100 billion European Clean Industrial Act, can actively support this process.
2. Risk: SME access to capital markets
   Sustainability reporting was intended to improve mid-sized companies’ access to capital markets. Transforming business models will still require substantial investment and financing. A lack of transparency and standardised reporting will only make investments and financing more difficult. Companies with ambitious sustainability goals should ensure they report these comparably. Regulation should encourage voluntary reporting as a means to facilitate financing.
3. Opportunity: Do more voluntarily!
   Fixed thresholds may look clear on paper but rarely reflect business reality. Companies with fluctuating turnover or employee numbers near the thresholds—or those experiencing growth—should voluntarily opt for comparable and transparent reporting. This is particularly relevant for businesses heavily reliant on supplying large, CSRD-reporting companies. Voluntary reporting can provide clear advantages, such as securing a "Preferred Supplier" status.

How Can We Help?

Forward-thinking business leaders remain committed to sustainability—even after the Omnibus package—integrating economic, environmental, and social responsibility. And they believe in their ability to make a difference. So do we! As your partner for sustainability innovation, we guide you through the transformation process. Specifically:

• Past investments do not have to be wasted. Insights from sustainability reporting, such as those gained from double materiality analysis, can be strategically valuable. They help identify opportunities to make business models more efficient (cost savings!), more revenue-generating (new “Green Growth” sales!), and more resilient in the short, medium, and long term. This ensures that existing knowledge about risks and opportunities remains useful.
• We support your company in developing and implementing a future-proof business strategy and transformation roadmap! Our Future Viability Analysis provides a transparent and comparable overview of your company, identifying key challenges for the next 5–15 years and outlining the specific transformation topics and steps needed to secure your future.

phiyond | Sustainable business practices with phiyond

Press release to Clean Industrial Deal: Clean Industrial Deal

Press release to Omnibus package: Commission simplifies rules on sustainability and EU investments, delivering over €6 billion in administrative relief - European Commission