EU Omnibus Legislation
A New Approach to Sustainability Regulations from the European Commission
Background on the Omnibus Legislation
On February 26, 2025, the European Commission introduced a comprehensive reform of existing sustainability laws known as the “Omnibus Legislation.” This initiative aims to significantly reduce the bureaucratic burden on businesses by simplifying reporting requirements and better aligning various regulations. The reform primarily affects the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy Regulation – key pillars of the Green Deal that some companies and Member States have criticized as overly complex and costly.
The proposed changes seek to enhance the competitiveness of European firms without undermining the EU’s sustainability goals.
European Commission President Ursula von der Leyen also announced further plans for simplification:
“…We are presenting our first proposal for far-reaching simplification. EU companies will benefit from streamlined rules on sustainable finance reporting, sustainability due diligence, and taxonomy. This will make life easier for our businesses while ensuring we stay firmly on course toward our decarbonization goals. And more simplification is on the way.”
— Ursula von der Leyen, President of the European Commission
(Source: Commission simplifies rules on sustainability and EU investments)
Impact on Businesses
The Omnibus reforms primarily offer companies a reduction in reporting obligations and greater legal certainty. Proposed measures include raising thresholds so that many mid-sized businesses are exempt from certain reporting requirements, refocusing sustainability reporting obligations on the largest enterprises, and easing requirements for smaller firms in the supply chain. Under the CSRD, existing deadlines would be extended by two years, pushing them back to 2028.
Other changes include introducing a financial materiality threshold for Taxonomy reporting and reducing reporting templates by up to 70%. Complex environmental criteria (DNSH) will be simplified, and the principal KPI system for banks (Green Asset Ratio) will be adjusted. Companies will also have more time to adopt new regulations, while smaller suppliers benefit from reduced documentation requirements.
However, critics warn that relaxing due diligence obligations could lead to setbacks in environmental and human rights protections.
Controversies and Reactions
The announcement of the Omnibus Legislation sparked a lively debate. While business associations and some governments have welcomed the proposed relief, NGOs and several larger corporations worry about potential rollbacks in sustainability standards.
In particular, extending CSRD reporting deadlines until 2028 and narrowing the scope of the CSDDD have drawn criticism. Some companies that have already invested in sustainability measures now feel their long-term planning is uncertain. There is also concern that overly simplified rules might ultimately undermine confidence in EU sustainability standards.
Next Steps
The legislative process now moves to the European Parliament and the Council of the EU. Both institutions must discuss and adopt the proposal before it can become law. The Commission has asked co-legislators to prioritize this issue so businesses can benefit from immediate relief.
Critics, however, want more extensive stakeholder consultations to ensure that sustainability objectives remain intact. In the coming months, it will become clear whether the EU can strike the right balance between competitiveness and sustainability.