European Commission Presents “Omnibus” Simplification Package with Amendments to CSRD, CSDDD, CBAM and Taxonomy

On 26 February 2025, the European Commission (“Commission”) published its “Omnibus I” or “Sustainability Omnibus” package as part of its mission to improve the competitiveness of the European Union. The Omnibus Package foresees changes to several EU instruments pertaining to sustainability reporting under the Corporate Sustainability Reporting Directive (“CSRD”) and Taxonomy Regulation, sustainability due diligence under the Corporate Sustainability Due Diligence Directive (“CSDDD”)¹, and imports of carbon-intensive products under the Carbon Border Adjustment Mechanism (“CBAM”).² The Commission aims to “cut red tape” and “simplify EU rules for citizens and business” by means of this Omnibus Package.

Calls for a reduction in the compliance burden created by these instruments have been growing for some time. However, in January this year, the French government joined calls for a significant delay and reduction of corporate sustainability requirements in the European Union, making France the second EU member state, after Germany, to make such demands. On the other hand, some European NGOs have called on the Commission to ensure that its “bolder, simpler, faster” mission does not result in weakening the provisions of the legislation.

We address the proposed changes in this Legal Update. At the outset, it is worth noting that what has been presented is a package of legislative proposals, opening the door to a wide range of possible outcomes. The European Parliament and the Member States in Council will now have the chance to prepare amendments to these proposals. Critically, the political complexion of the European Parliament (“EP”) and of Member State governments has changed dramatically since the original legislation was presented.

I. CSRD

We highlight below seven key items in relation to the CSRD as set out in the proposal in the Omnibus Package:

1. Reporting Thresholds

The proposal in the Omnibus Package is expected to reduce the number of entities subject to CSRD mandatory sustainability reporting requirements by about 80%

Under the existing directive, mandatory CSRD reporting was to apply in four waves. The proposal generally narrows the requirement to apply to large undertakings (as defined in the Accounting Directive (Directive 2013/34/EU)) that have more than 1,000 employees.

In addition, under the current directive, the reporting requirements were to apply to non-EU companies that generated a net turnover of over EUR 150 million in the EU with a qualifying “large” EU subsidiary or an EU branch that generates a net turnover of over EUR 40 million. The proposal increases these amounts to EUR 450 million and EUR 50 million, respectively.

No changes have been made to the “listing” aspects of CSRD - listing on a regulated market in the EU will continue to bring non-EU companies in scope of the rules in the same manner and in accordance with the update threshold tests.

2. Implementation Schedule

There is a saying associated with London buses: “You wait for one bus and two come along at once.” The EU (omni)bus is no different.

As part of the proposals, a separate draft directive to be transposed no later than 31 December 2025 (the “Stop the Clock proposal”) delays by two years the implementation of existing requirements for the second and third wave or reporting companies under the existing CSRD package.

The Commission aims for quick agreement on this to provide certainty for companies on the timing and transposition of CSRD. The aim is for the Stop the Clock proposal to delay the application of CSRD for a sufficient period for certain entities to allow the full package to pass, and ensure that entities that will ultimately not be required to report are not caught by existing rules in the intervening period.

The effect of the two proposals can be summarised as follows:

3. Voluntary Reporting

For undertakings not subject to mandatory sustainability reporting requirements, the draft directive proposes a proportionate standard for voluntary use, to be introduced through a delegated act on the basis of the “VSME” standard developed by EFRAG.

4. Value Chain Reporting

The current version of the CSRD protects smaller undertakings in supply chains from facing excessive reporting requests by including a value-chain cap; i.e. the ESRS may not contain reporting requirements that would require undertakings to obtain from SMEs in their value chain excessive information. The Commission proposes to extend the application of the value-chain cap by applying it directly to the reporting company instead of being only a limit in the ESRS and it would protect all undertakings with up to 1000 employees rather than just SMEs. The limit for what disclosure requests would be excessive would be defined by voluntary standards developed by EFRAG for companies not subject to the mandatory disclosure requirements, but choose to voluntarily disclose sustainability datapoints.

5. Revision of the ESRS

The Commission proposes a revision of the first set of ESRS with the aim to reduce the number of mandatory datapoints companies have to report on by (i) removing less important datapoints, (ii) prioritizing quantitative datapoints over narrative text, and (iii) further distinguishing between mandatory and voluntary datapoints.

6. Removing Mandatory Taxonomy Reporting for Companies with Less Than EUR450 Million Net Turnover

Amongst other relaxations, a new regime is proposed where large undertakings with more than 1000 employees and a net turnover not exceeding EUR 450 million are only obliged to disclose their turnover and CapEx KPIs if they voluntarily “claim” taxonomy alignment. Disclosure of the OpEx KPI is voluntary for such companies.

7. European Sustainability Reporting Standards (ESRS) Disclosure Requirements

While the CSRD initially mandated so-called sector-specific standards (i.e., disclosure requirements designed for a specific industry only), the Commission proposes to eliminate such standards to avoid an increase in disclosure requirements for certain sectors. Companies could, thus, focus on the sector-agnostic reporting standards (i.e., disclosure requirements applying to all companies subject to the CSRD regardless of their industry).

8. Limited Assurance

The CSRD currently requires limited assurance of sustainability reporting. The proposal mandates the Commission to issue targeted assurance guidelines that clarify the procedures assurance providers must undertake as part of their limited assurance engagement, in addition to adopting applicable standards in a delegated act in 2026. The proposal also removes the Commission’s empowerment to adopt reasonable assurance standards by 1 October 2028.

II. CSDDD

We highlight below ten key changes to the CSDDD as foreseen by the proposal in the Omnibus Package.

1. Postponement of Implementation

The transposition deadline for Member States is postponed by one year to July 2027, and the application date for the first wave of companies is delayed to July 2028.³ The Commission proposes more preparation time for businesses and to allow itself to prepare and issue guidance documents ahead of the application of the CSDDD.

2. Scope of Maximum Harmonisation Between Member States

The scope of maximum harmonisation is extended to additional provisions of the CSDDD, including identification duties, addressing adverse impacts, and providing complaints and notification mechanisms. Maximum harmonisation means that Member States may not introduce provisions within areas covered by the CSDDD that would go beyond the requirements of the CSDDD itself. The Commission aims to ensure a level playing field across Member States and reduce compliance costs.

3. Risk Assessment: Limitation to Tier 1 Business Partners

Due diligence obligations are limited to direct (Tier 1) business partners, with exceptions for cases where there is plausible information suggesting adverse impacts beyond Tier 1.

4. Stakeholder Engagement

The definition of 'stakeholder' is pared back to include only directly affected individuals and communities, and the stages requiring stakeholder engagement are reduced.

5. Periodic Assessments

The frequency of periodic assessments to assess the implementation and effectiveness of due diligence processes is extended from one year to five years, with ad hoc assessments required only when significant risks arise.

6. Risk Mitigation: Business Relationship Termination

The obligation to terminate business relationships as a last resort is removed, but the requirement to suspend them remains.

7. Financial Penalties

The minimum cap for financial penalties (5% of global turnover) is removed. Instead, Member States must ensure that fines are effective, proportionate, and dissuasive, with guidelines to be developed by the Commission.

8. Civil Liability

The specific EU-wide civil liability regime is removed, leaving companies subject to liability under Member State laws.

9. Climate Transition Plans

The requirement to 'put into effect' climate transition plans is removed, aligning the CSDDD with the CSRD. Companies must include implementation actions in their plans, providing clearer guidance.

10. Review Clause for Financial Services

The clause requiring a review of additional due diligence rules for financial services by July 2026 is deleted, reducing uncertainty for the finance sector.

Through these changes, the Commission aims to reduce the regulatory burden on businesses, particularly SMEs, while ensuring that the core objectives of the CSDDD in mitigating human rights and environmental impacts are maintained.

III. Taxonomy

The taxonomy is a classification system that defines criteria for economic activities that are aligned with a net zero trajectory by 2050 and the broader environmental goals other than climate. Under the EU Taxonomy in-scope companies must report on the share of their Taxonomy eligible economic activities. The Taxonomy entered into force in 2020, but the Omnibus Proposal also includes changes touching the Taxonomy, such as:

• Amendment of the CSRD: The Commission proposes to amend the CSRD regarding Taxonomy reporting to reduce the number of companies that are obliged to report their Taxonomy alignment, by envisaging voluntary Taxonomy reporting for companies within the future CSRD scope with a net turnover up to 450 million.
• Voluntary reporting: Commission suggests that companies that have made progress towards sustainability targets, but only meet certain EU Taxonomy requirements, may choose to voluntarily report on their partial EU Taxonomy alignment to demonstrate their existing efforts and progress.
• Simplification: In addition, the Commission suggests to simplify the reporting templates to reduce reportable datapoints and exempt companies from assessing Taxonomy eligibility and alignment of their economic activities that are not financially material for their business.

IV. CBAM

The Commission's proposed changes to the CBAM do not alter the main operation of the mechanism, but seek to simplify processes for businesses and exclude small importers from CBAM obligations.

1. Exemption for Small Importers

• New De Minimis Threshold: The proposed changes introduce a de minimis threshold of 50 tonnes of net mass per year, which corresponds to approximately 80 tonnes of CO₂ equivalent on average per importer.⁴ This threshold aims to exempt small importers, mostly SMEs and individuals, from CBAM obligations. 
• Administrative Relief: Importers below this threshold will no longer be subject to CBAM obligations. However, they will need to self-identify as “occasional CBAM importers” when lodging their customs declarations and monitor that they do not exceed the threshold over the year.

2. Simplification Measures for “In-Scope” Importers

• Authorisation of Declarants: The process for authorising CBAM declarants will be simplified, including making the consultation procedure optional and introducing a role for CBAM representatives to assist with compliance.
• Emission Calculation: Several measures will simplify the calculation of emissions:
  • Exclusion of non-calcined clays from the CBAM scope.
  • Allowing declarants to freely choose between reporting actual emissions and using default values without needing to justify the choice.
  • Simplifying the determination of default values by using the average emission intensity of the ten countries with the highest emission intensities when reliable data for the exporting country is unavailable.⁵
  • Excluding emissions from downstream processing steps for certain aluminium and steel goods.
  • Attributing zero embedded emissions to EU-produced precursors already covered by the EU ETS.
  • Removing the requirement to verify emissions based on default values provided by the Commission. 
  • Clarifying that only direct emissions of electricity need to be accounted for under CBAM.
• Reporting Requirements: The deadline for submitting annual CBAM declarations and surrendering certificates will be moved to 31 August, with the repurchase deadline set to 30 September and certificate cancellation on 1 October. This constitutes a departure from a leaked draft, in which the Commission had foreseen a deadline for submitting annual CBAM declarations and surrendering certificates of 30 November and a repurchase deadline of 1 December 2025.
• CBAM Registry Access: Improvements will be made to facilitate access for third-country operators and accredited verifiers to the CBAM Registry.

3. Financial Liability Simplifications

• Certificate Management: The “80% rule” will be revised to a “50% rule,” reducing the financial burden on declarants. Declarants will have the option to base the calculation on either public default values or the number of CBAM certificates surrendered in the previous year.
• First Year Adjustment: For the first year of the CBAM financial adjustment (2026), declarants will be able to purchase CBAM certificates starting from February 2027, giving them more time to collect necessary data.
• Default Carbon Prices: The Commission may determine default carbon prices for third countries, simplifying the process for declarants to claim deductions for carbon prices paid abroad.

4. Anti-Abuse and Anti-Circumvention Measures

• Strengthened Provisions: The proposed changes include stronger anti-abuse provisions and a joint anti-circumvention strategy with national authorities to ensure the effectiveness of CBAM.

5. Future Review

A full review of CBAM is planned for later in 2025 to assess its potential extension to other ETS sectors, downstream goods, and indirect emissions. The Commission will also explore ways to support exporters of CBAM products at risk of carbon leakage, followed by a legislative proposal in early 2026.

V. Next Steps

The proposals for the CSRD, CSDDD and CBAM will be submitted to the EP and the Council for their consideration and adoption under the ordinary legislative procedure. The changes will enter into force once these institutions have reached an agreement, and following publication in the EU Official Journal. In light of the impending deadlines under these instruments, the Commission has invited the EP and the Council to prioritize this omnibus package, in particular the proposal postponing certain disclosure requirements under the CSRD and the transposition deadline under CSDDD.

The draft Delegated Act amending the current delegated acts under the Taxonomy Regulation will be adopted after public feedback, and will apply at the end of the scrutiny period by the EP and the Council that generally lasts two months.