All change please! Omnibus re-routes CSRD, CSDDD, Taxonomy and CBAM

The European Commission (EC) has published its highly anticipated sustainability-related Omnibus simplification package (Omnibus proposal) – the first of several simplification measures listed in the 2025 Work Programme. This package covers sustainability disclosures (CSRD and Taxonomy), supply chain due diligence and climate transition planning (CSDDD) as well as carbon import levies (CBAM). It proposes significant changes aimed at reducing the burden of sustainability reporting and due diligence rules, in line with industry demands and a shift in EU priorities toward competitiveness, growth and prosperity.

The headline changes proposed are summarised below. Please get in touch if you would like a copy of our longer briefing or to talk through what this means for your organisation.

“Stop the clock” for CSRD and CSDDD

The package proposes a “stop the clock” delay to CSRD and CSDDD which, if passed into EU law, would require transposition by Member States by the end of the 2025. Its effect would be as follows: 

• CSRD: The obligation on large EU companies to prepare reports on financial years starting in 2025 will be delayed two years, with the first reports required for financial years starting in 2027. There would be no immediate delay to reporting obligations on Public Interest Entities (PIEs) for FY 2024 reporting. The PIE-specific obligation is proposed to be removed altogether as part of more substantive proposals (separate to the immediate “stop the clock” relief), which will likely take longer to agree. 
• CSDDD: Obligations on the largest companies (EU-headed groups with over 5000 employees and €1.5bn net turnover, or non-EU-headed groups with over €1.5bn turnover in the EU) will be delayed from 2027, to start one year later from July 2028 (at the same time as large companies - EU groups with over 3000 employees and €900m net turnover, or non-EU-headed groups with over €900m turnover in the EU). The start-date of CSDDD reporting obligations (2029) for these large companies will not change, but will be delayed a year, to 2030, for all other companies in scope.

Key proposed changes for CSRD 

The package proposes to change the CSRD applicability thresholds:

• For EU company reporting, any companies with 1000 employees or less (on a group or individual basis) would be completely excluded. No changes are proposed to the net turnover or balance sheet thresholds, but the Commission suggests that the employee threshold change will remove 80% of companies from scope. 
• SMEs have also been removed from the regime.
• For the expanded global group reporting required from 2028, the applicability threshold is proposed to increase, capturing only those groups that generate more than €450m turnover in the EU (though the proposal has not provided any greater clarity on the meaning of “generated in the Union”). 

The Commission also commits to review the European Sustainability Reporting Standards (ESRS) to “substantially reduce” the number of mandatory data points, and plans to adopt the revised ESRS in time for those who would be reporting on 2027 financial years. At this stage, the proposal does not amend the CSRD’s double materiality requirements. Furthermore, sector specific expansions to the ESRS standards are no longer proposed to be pursued. Reports will still be required to undergo limited assurance, but the EC’s option to increase this to reasonable assurance from 2028 has been removed.

Under the proposal, companies would not need to obtain information from companies in their value chain who do not have over 1000 employees, unless that information is disclosed pursuant to a new EU “Voluntary Sustainability Reporting Standard” to be adopted. This standard is proposed to be used by companies not otherwise in the proposed revised scope of CSRD. This standard will be based on the SMEs standard. 

Key proposed changes for CSDDD

The proposal limits considerably the reach of due diligence obligations: these would apply only to a company’s own operations, those of its subsidiaries, and those of its direct business partners (“tier 1”). Only in cases where intermediate business partners are set up artificially (fraudulently), or where companies have plausible information suggesting an adverse impact at the level of an indirect business partner, would additional due diligence obligations for indirect business partners arise. This approach aligns with the German Supply Chain Duty of Care Act (LkSG) which generally served as a blueprint for CSDDD.

When mapping the risks in their value chain, companies would be required to seek information from business partners where adverse impacts are most likely to occur. Where these business partners have fewer than 500 employees, obligations regarding information requests would be limited to the information specified in the proposed Voluntary Sustainability Reporting Standard under CSRD. The proposal also removes the “duty to terminate” business relationships as a measure of last resort, replacing it with a duty to suspend the relationship while continuing to work with the business partner towards a solution. The proposal extends the minimum intervals at which companies need to review the adequacy and effectiveness of due diligence measures from one year to five years.

While the obligation to adopt a transition plan for climate change mitigation remains, the obligation to “put into effect” the plan would be replaced by a requirement for the plan to include “implementing actions” to transition to a sustainable economy. The Commission has suggested this change to better align with the CSRD transition plan. It remains to be seen what this means – and we hope it will be clarified as the proposal proceeds.

The proposal also substantially modifies the civil liability provisions: Member States are no longer required to: (i) provide for a specific, EU-wide civil liability regime for non-compliance with CSDDD; (ii) allow for representative action by NGOs and trade unions; or (iii) ensure that domestic law applies regardless of where the harm occurs. While this would considerably reduce liability risks relative to the current CSDDD framework, the core liability provisions have been retained, which require national law to ensure that claimants who suffer harm as a result of a breach of CSDDD due diligence obligations have a right to full compensation from the liable company. The ability to impose penalties also remains, though the proposal no longer includes the obligation on Member States to adopt a maximum penalty of ”at least 5% of net worldwide turnover”.

Importantly, the proposal does not modify the scope of CSDDD’s applicability. While many stakeholders pushed to limit the extraterritorial application of CSDDD, non-EU headed company groups will for now remain in scope if they exceed the thresholds for turnover generated in the EU.

Key proposed changes for EU Taxonomy

Whilst the current framework requires EU Taxonomy disclosures from EU companies subject to CSRD, the proposal would limit this to companies who, individually or in aggregate as a group, generate net turnover of €450 million. A one-month consultation has been launched to simplify the Taxonomy reporting requirements. The consultation includes proposed changes to exempt companies from assessing Taxonomy-eligibility and alignment of their economic activities that are not financially material for their business. 

Key proposed changes for CBAM

The proposal to amend the CBAM Regulation aims to exempt small and medium-sized enterprises from reporting obligations related to the import of certain CBAM goods. The key change would set the de minimis threshold for CBAM applicability at 50 tonnes per year for imports of iron and steel, cement, fertilisers and aluminium. Importers who do not meet the threshold would only have to declare themselves as occasional CBAM importers when submitting customs declarations. The Commission has also called for a strengthening of anti-circumvention measures to avoid misuse of this exemption. According to the Commission, this proposal would exclude 90% of importers that would have been in scope under the current legislation, whilst still capturing 99% of imported embedded emissions.

Next steps

The proposed changes to the CSRD, CSDDD and CBAM will be made through a level 1 amendment. It will now undergo separate review and amendment processes by the European Parliament and the Council (representing the EU27 Member States). Once each institution has adopted its position, the Commission, Parliament and Council will sit together in “trilogues”, seeking to reconcile positions until they can agree on a final common text. 

This process has no set timeline, and usually lasts around 18 months or longer if positions are very far apart, as is expected in this case. The centrist- and left-leaning parties in the European Parliament have already expressed concerns with regard to the the Commission's approach, dubbing it “deregulation” rather than “simplification”, and we expect difficult political negotiations. Therefore, the proposed amendments will still evolve and their final form remains uncertain. The Commission “invites the co-legislators to treat this omnibus package with priority”, in particular the "stop-the-clock" provisions which “aim to address key concerns identified by stakeholders.” In addition, CSRD as well as CSDDD amendments will then need to be transposed into Member State law. While it will be a challenge for companies to navigate the resulting legal uncertainty, stakeholders might want to consider contributing their views to the ongoing legislative process. 

Summary on timing/thresholds

The revised thresholds and compliance dates proposed for each of the regimes are summarised below: