The EU Omnibus Package: From Complexity to Clarity or Setback for Sustainability?
20 Mar 2025
Simplifying Compliance or Weakening Sustainability?
On 26th February 2025, the European Commission released the first set of drafts on the Omnibus Package, aimed at streamlining and simplifying the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the EU Taxonomy, and CBAM. This move is a direct response to the EU Competitiveness Compass, which builds on the recommendations of the Draghi Report to drive inclusive economic growth in Europe by enabling business opportunities, attracting investments for transitioning towards sustainable economy while meeting Green Deal's ambitious objectives.
As large companies have already started publishing their CSRD compliance reports, and others are intensively preparing, the recently proposed simplified omnibus packages have sparked a range of reactions, from disappointment to relief, in response to the regulatory mandates.
Proposed Key Changes Under the Omnibus Package
|
CSRD (Corporate Sustainability Reporting Directive) - Standardized sustainability reporting requirements for companies with respect to environmental, social, and governance (ESG) performance. |
Raising the reporting threshold (80% reduction in the scope): - Removal from mandatory reporting for companies with up to 1,000 employees, i.e., only companies with more than 1,000 employees and either a turnover above EUR 50 million or a balance sheet above EUR 25 million will be required to report. Stop-the-clock: - Postponement of reporting for second and third waves companies under CSRD by 2 years (i.e., postponed until 2028 and until 2029, respectively). - Adoption of a proportionate voluntary reporting standard for non-CSRD companies based on the current voluntary small and medium-sized enterprises (VSME) standards developed by European Financial Reporting Advisory Group (EFRAG). |
|
Non-EU Undertakings: - No change in the reporting timeline. However, the net turnover threshold increased to EUR 450 million annually, and in-scope EU branch/subsidiary generating more than EUR 50 million annually. |
|
|
Simplification on Reporting: - Revision on the first set of European Sustainability Reporting Standards (ESRS) to reduce the number of mandatory data points:
- No change to the Double Materiality concept. |
|
|
No Sector Specific Standards: Removal of obligation for sector-specific standards, thereby avoiding an increase in prescribed data points. |
|
|
Reducing “Trickle-down” effect on the value chain: - Removal of requirement for in-scope companies to obtain data from non-CSRD entities; any requests should be limited to the new voluntary standards based on the VSME. |
|
|
Assurance: - Removal of future mandatory “reasonable assurance” requirements, keeping audits at the limited assurance level. - Targeted sustainability assurance guidelines by 2026 instead of adoption of assurance standards. |
|
|
CSDDD (Corporate Sustainability Due Diligence Directive) - Assesses and mitigates human rights and environmental risks along their supply chains. |
Postponement of application: - Postponement of application by 1 year for wave 1[1] companies (deadlines for wave 2[2] and 3[3] remain the same, i.e., 2028 and 2029, respectively). |
|
Focus on direct business partners: - Companies will only need to conduct due diligence on their own operations and direct suppliers (tier 1), except in cases of circumvention or clear risk indicators. |
|
|
Simplification (reduced frequency of compliance reviews): - Reduced frequency of supplier monitoring to once every five years instead of annually. - No duty to terminate contracts with non-compliant suppliers as a last resort; instead, companies are recommended to suspend their business relationship with non-compliant suppliers while actively working towards a solution to become compliant. - Climate Transition Plans: While climate plans must include implementation measures, actual implementation is not mandated to be reported. |
|
|
Stakeholders: - Stakeholder definition: Re-defined and limited to relevant stakeholders who are directly affected by the products, services, and operations of the company, its subsidiaries, and business partners. - Stakeholder engagement: Required only when identifying impacts, developing action plans, and when designing remediation measures. |
|
|
Civil liabilities and penalties: - Removal of strict liability provisions; no mandatory fine threshold (5% of turnover minimum fine cap removed), penalties to be set by national authorities.
|
|
|
EU Taxonomy - Classification system to determine environmentally sustainable economic activities, serving as a guiding tool for investment decisions toward green initiatives. |
Scope: - Full scope reporting requirement only for companies covered by CSRD and with a turnover above EUR 450 million. - “Opt-in” regime for other large businesses which claim alignment or partial alignment: Shall disclose their KPIs on turnover and CapEx May choose to disclose their OpEx KPI - Postponement of the application of CSRD in the second and third waves will extend the deadline for reporting indicators under the Taxonomy Regulation. |
|
Simplification: - Introduction of Materiality Thresholds: Eligible activities (cumulative) <10% of any of the KPIs’ denominators (Turnover, CapEx, OpEx, Assets) would exempt from performing an alignment assessment. Eligible activities turnover (cumulative) <25% of the turnover KPI’s denominators may omit reporting on the OpEx KPI. - Simplification in the reporting templates (70% reduction in data points). - Simplification of the “do no significant harm” (DNSH) criteria (especially in pollution prevention and control on the use or presence of hazardous substances). |
|
|
CBAM (Carbon Border Adjustment Mechanism)
- Imposes a carbon price on imported goods from carbon-intensive industries to prevent carbon leakage and ensure fair competition. It requires importers to report emissions embedded in their products and purchase CBAM certificates that matches the EU Emissions Trading System’s (ETS) carbon price. |
Reduction in Scope: - Exemption from CBAM obligations for importers of small quantities of CBAM goods (threshold of 50 tonnes). - Exclusion of non-calcined kaolinic clays from the scope of products. |
|
Future Scope Extension: - The European Commission will present a comprehensive CBAM review report in the second half of 2025, which could lead to the inclusion of more products under the scope of the legislation. |
|
|
Simplified Calculation Methodology: - Recognizing that most of the embedded emissions from aluminium and iron or steel products come from raw materials (i.e., precursors), subsequent production processes that are not covered by the EU ETS can be excluded from the system boundary, except for integrated plants. |
|
|
Verification: - Verification is only required for actual data. Default values will be calculated by the European Commission, which consists of the average of the ten exporting countries with the highest emission intensities for which reliable data is available. - Accredited verifiers can get registered to access the CBAM registry. |
|
|
Carbon Pricing: - Authorized CBAM declarants can claim for the carbon price paid in a third country other than the country of origin. Authorized CBAM declarants can utilize default carbon prices provided by the European Commission if the price is unknown. |
|
|
CBAM Certificate Requirements and Important Dates - CBAM declarants will only be required to purchase CBAM certificates corresponding to 50% (reduced from 80%) of the embedded emissions in all goods imported from the beginning of the calendar year by the end of each quarter. This will apply from January 1st, 2027. - Member states will start selling CBAM certificates on a common central platform from February 1st, 2027. - Adjustments to the total number of CBAM certificates to be surrendered will now reflect the extent to which free allowances are allocated in the EU ETS. - The annual cancellation of remaining CBAM certificates that were purchased during the year before the previous calendar year by the European Commission will now occur on October 1st instead of July 1st. - The first cancellation of CBAM certificates corresponding to the declared embedded emissions in 2026 will occur on December 1st, 2027. |
|
|
Declaration Submission Deadline - The annual reporting deadline during the definitive period has been changed to August 31st (from May 31st). The first reporting year will still remain in 2027 for the year of 2026. |
What does it mean for you?
For Small and Medium Enterprises (SMEs):
- Extensive relief from sustainability reporting obligations and lower cost.
- Increased flexibility in sustainability disclosures, allowing for gradual improvement rather than rigid compliance.
For Large Corporations:
- Decreased reporting burdens, particularly for those with fewer than 1,000 employees.
- Increased time to prepare for sustainability reporting under the CSRD and CSDDD.
- For large importers, the proposed changes to CBAM should translate to reduced administrative and financial burden, such as CBAM calculation and reporting; purchasing CBAM certificates every quarter; and preparing (data collection, calculation, verification, etc.) for their first CBAM declarations. However, this should not be mistaken with acting later. The lead time from data collection to completing verifications could take 4 to 6 months, subject to how extensive the supply chain network is and timeliness of data return.
For Investors & Stakeholders:
- Reduced complexity in sustainability disclosures, making it easier to assess companies' sustainability performance.
- Improved transparency and clarity in reporting requirements, aligning with global standards while reducing excessive obligations.
Next Steps for Businesses
As the legislative process unfolds, the true impact of the Omnibus Package remains to be seen. The coming months will determine how policymakers refine these regulations and what balance they strike between simplifying compliance and meeting ambitious sustainability goals.
The key question remains: will the EU’s regulatory easing empower businesses, or will it hinder the bloc’s leadership in sustainability? Despite limiting the immense impact of the initial EU regulatory requirements, it is important to recognize that the Omnibus Package aims to streamline and simplify compliance, making it easier for companies to comply while maintaining a competitive yet sustainable EU market.
For those companies affected, the only option before the Omnibus is officially approved is to keep aiming for reporting in 2026. Businesses need to act now to stay ahead, ensuring they are prepared for compliance regardless of the final legislative outcome.
Did you know Intertek can expertly guide your business through the upcoming EU Omnibus Package changes? Whether you are managing ESG data, developing Greenhouse Gas (GHG) Inventory, streamlining reports with Key Performance Indicators (KPIs) and targets or developing strategic roadmaps, we’re your trusted partner in adapting your ESG framework and integrating it into your business strategy.
[1] EU companies with more than 5,000 employees and a net annual worldwide turnover of over EUR 1.5 billion and non-EU companies generating more than EUR 1.5 billion in net turnover within the EU.
[2] EU companies with more than 3,000 employees and a net annual turnover exceeding EUR 900 million and Non-EU companies generating EUR 900 million turnover in the EU.
[3] All other business within scope i.e. companies with over 1000 employees, and a net annual worldwide turnover above EUR 450 million; and all other non-EU- companies generating turnover of above EUR 450 million in the EU.
EU companies with more than 5,000 employees and a net annual worldwide turnover of over EUR 1.5 billion and non-EU companies generating more than EUR 1.5 billion in net turnover within the EU.
