How EU Omnibus Directive is Reshaping Sustainability Reporting

On February 26, 2025, the European Commission introduced its Sustainability Omnibus Package—a bold proposal to streamline key Green Deal regulations, including the Corporate Sustainability Reporting Directive (CSRD ), the Corporate Sustainability Due Diligence Directive (CSDDD), the Carbon Border Adjustment Mechanism (CBAM), and the EU Taxonomy. This move aims to lighten the regulatory load on businesses striving for sustainability while preserving the EU’s ambitious climate goals. These are not final rules yet; they mark the starting point of a legislative journey through EU institutions, with approval still pending from the European Parliament and Council. Though the outcomes remain uncertain, companies in India, the US, Europe, and beyond can start preparing for potential shifts in how they report emissions and sustainability performance. At Sprih, we’re here to unpack these proposals and help you get ahead of the curve.

Why the EU Omnibus Legislation?

The EU Omnibus Directive comes from the EU’s Competitiveness Compass, launched in January 2025 by President Ursula von der Leyen. It builds on the 2024 Draghi Report’s call to strengthen EU economic prosperity. The goal? Create a business-friendly environment by cutting administrative burdens—25% for large companies and 35% for SMEs. The Commission aims to boost growth, quality jobs, and investment for a sustainable economy.

The Commission’s 2023 call for evidence and the Draghi Report exposed a major issue: complex sustainability rules were hurting EU businesses. Today’s EU Omnibus, part of a broader Clean Industrial Deal, simplifies regulations to cut costs and achieve policy goals efficiently. Announced in the Commission’s February 11, 2025 work programme, this first “Omnibus” package reforms sustainability and investment rules. It directly responds to stakeholder demands for pragmatism and simplicity.

Key Changes to Sustainability Regulations

Corporate Sustainability Reporting Directive (CSRD)

The latest CSRD revisions significantly reduce reporting burdens, narrowing the scope to large companies with over 1,000 employees and postponing deadlines for SMEs. Key changes include voluntary standards for smaller firms, simplified reporting, and the removal of sector-specific requirements, cutting compliance costs by billions while maintaining double materiality principles

Revised Scope for Reporting

The CSRD now applies only to large companies with over 1,000 employees and either €50 million turnover or €25 million in balance sheet. This adjustment reduces covered companies by 80%, aligning CSRD with CSDDD thresholds. Smaller firms no longer face mandatory reporting.

Delayed Implementation Timeline

Reporting deadlines for large companies (wave 2) and listed SMEs (wave 3) are postponed by two years. This delay allows businesses to adapt and gives legislators time to finalize changes.

Voluntary Standards for Smaller Firms

Companies with up to 1,000 employees no longer fall under mandatory CSRD rules. The Commission will introduce voluntary reporting through a delegated act based on the VSME by EFRAG. This “value chain cap” prevents larger firms and financial institutions from imposing excessive data demands.

Simplified Reporting Standards

The ESRS will undergo major revisions. The Commission will cut data points, clarify vague provisions, and improve alignment with EU laws. These changes reduce complexity and lower reporting costs.

Elimination of Sector-Specific Standards

The proposal removes sector-specific reporting rules and eliminates the Commission’s authority to create tailored requirements. This change ensures a uniform, less burdensome approach across industries.

Eased Assurance Requirements

The option to increase assurance levels from limited to reasonable has been dropped. This keeps compliance simpler and more predictable.

Double Materiality Stays

Companies must still report sustainability risks, business opportunities, and their impacts on people and the environment.

These CSRD revisions will save businesses substantial costs. Changes to the CSRD scope and ESRS modifications could reduce annual administrative costs by €4.4 billion. Narrowed CSRD requirements alone will cut €0.8 billion in yearly Taxonomy reporting costs. Additionally, exempted companies will avoid one-time expenses for reporting and assurance, estimated at €1.6 billion for CSRD and ESRS compliance, plus €0.9 billion for Taxonomy-related efforts.

Corporate Sustainability Due Diligence Directive (CSDDD)

Extended Preparation Time

Companies get an extra year to prepare for the new due diligence framework. The transposition deadline shifts from July 26, 2026, to July 26, 2027. The first application phase, covering about 6,000 EU and 900 non-EU companies, now starts on July 26, 2028. To ease this transition, the Commission will release guidelines by July 2026. Businesses can then rely on best practices instead of costly legal or advisory services.

Focused Due Diligence Scope

Companies no longer need to conduct full due diligence across complex value chains. They must assess indirect partners only when credible evidence suggests potential human rights or environmental risks. This shift reduces unnecessary checks on indirect partners.

Simplified Compliance Requirements

Several measures cut complexity and costs for large companies.

Regular assessments now occur at least once in five years instead of at least once in a year, unless evidence shows current measures are inadequate.
Stakeholder engagement obligations are streamlined to reduce administrative burdens.
Companies no longer need to terminate business relationships as a last resort, increasing flexibility in supplier management.

Shielding SMEs and Small Mid-Caps

The impact on smaller firms is limited. Large companies can only request information from SME and small mid-cap partners (up to 500 employees) at the Voluntary Standard for SMEs (VSME) level. Additional data is allowed only when essential for impact mapping and unavailable elsewhere.

National Liability Frameworks

The EU Omnibus Directive removes harmonized civil liability conditions, leaving national laws in control. Member States no longer need to allow trade unions or NGOs to file representative actions. Local laws will determine whether national liability rules override third-country regulations.

Alignment with CSRD

Climate mitigation transition plans now align with CSRD requirements. This change ensures consistency across due diligence and reporting obligations.

Enhanced EU-Wide Consistency

More due diligence provisions now follow maximum harmonization. This change levels the playing field across the EU and reduces inconsistencies in implementation.

Scope Clarification

The review clause considering financial services in the CSDDD’s scope is removed. This change confirms that financial services remain excluded for now.

These adjustments simplify the due diligence framework and improve consistency. Estimated annual savings reach €320 million, with additional one-time cost reductions. By focusing on direct suppliers, easing periodic reviews, and protecting smaller partners, the CSDDD balances accountability and practicality.

Get a more in-depth analysis here.

EU Taxonomy

Shift to Voluntary Reporting

For companies within the future CSRD scope—large firms with over 1,000 employees—those with a net turnover up to €450 million can now opt into Taxonomy reporting voluntarily. This reduces the number of businesses mandated to disclose their Taxonomy alignment, easing compliance pressures.

Recognizing Partial Progress

Companies making strides toward sustainability but not fully meeting Taxonomy criteria can voluntarily report their partial alignment. This option highlights their efforts and progress, offering recognition for their commitment. To ensure consistency, the Commission will develop delegated acts standardizing the content and presentation of this reporting.

Streamlined Reporting Process

Draft amendments to the Taxonomy Disclosures, Climate, and Environmental Delegated Acts introduce major simplifications:

Reporting templates are overhauled, slashing data points by nearly 70% to lighten the administrative load.
Companies are exempt from assessing Taxonomy eligibility and alignment for economic activities deemed financially immaterial—those not exceeding 10% of total turnover, capital expenditure, or assets—focusing efforts where they matter most.
For financial institutions, the Green Asset Ratio (GAR) for banks is refined. Banks can exclude exposures to firms outside the future CSRD scope (i.e., those with fewer than 1,000 employees) from the GAR denominator, making this key performance indicator simpler and more practical.

Simplifying ‘Do No Significant Harm’ Criteria

The Commission is seeking stakeholder input via public consultation on two alternative options to streamline the complex “Do No Significant Harm” (DNSH) criteria for pollution prevention and control, particularly related to chemical use and presence. These criteria apply across all economic sectors under the Taxonomy, and the proposed simplifications aim to make compliance more manageable, with feedback invited on both approaches.

Carbon Border Adjustment Mechanism (CBAM)

Small Importer Relief: A 50-tonne annual threshold—roughly 80 tonnes of CO2 per importer—exempts 90% of importers (182,000 firms, mostly SMEs and individuals) handling small quantities of CBAM goods (iron, steel, cement, fertilizers), covering just 1% of emissions while capturing 99% of the total.
Easier Compliance: For importers still in scope, authorization, emissions calculations, reporting, and financial liability are streamlined, paired with stronger anti-abuse measures and a joint anti-circumvention strategy with national authorities.
Simplification Goals: Informed by the transitional phase since October 2023, these changes aim to reduce burdens on SMEs and occasional importers while maintaining CBAM’s strength, sparing 90% of companies from reporting duties.
Future Review: A 2025 review will explore expanding CBAM to other ETS sectors, downstream goods, and indirect emissions, with a legislative proposal due in early 2026.

Benefits: These updates ease administrative loads, especially for smaller players, while upholding nearly full emission coverage.

Understand the implications of the EU Omnibus proposal on CBAM.

InvestEU Regulation

Streamlined Compliance: Reporting frequency and content are reduced, exempting small SMEs, and the SME definition is adjusted for certain financial products. This cuts administrative demands for implementing partners, intermediaries, and recipients across legislative and non-legislative rules.
SME Support: SMEs benefit from a simpler definition, waived KPIs for small transactions, and fewer reporting inputs to partners, directly easing their workload.
€50 Billion Investment Boost: An additional €2.5 billion EU guarantee, paired with capacity from EFSI, CEF, and InnovFin, unlocks €50 billion in public and private investment for clean tech, digitalization, and sustainable infrastructure.

Benefits: These simplifications save €350 million for partners and recipients while driving growth with the €50 billion infusion.

How Companies Will Benefit from the EU Omnibus Directive

The EU Omnibus Directive promises €6.3 billion in annual administrative cost savings and €50 billion in additional investment capacity. Here’s the breakdown:

Large Companies: Simplified CSRD and CSDDD rules save time and costs, with clearer transition plan alignment and voluntary Taxonomy options boosting flexibility.
SMEs and Small Mid-Caps: Exemptions and VSME standards shield them from excessive requests, while InvestEU simplifications ease access to funds.
Importers: CBAM exemptions and streamlined processes benefit 90% of smaller players, maintaining environmental goals.
Global Players: Non-EU firms (e.g., in India and the US) with EU ties gain from reduced extraterritorial demands and harmonized rules.

Global Implications: Europe, US, and India

Europe: EU firms, especially SMEs, enjoy reduced burdens, while larger players adapt to streamlined yet robust requirements, enhancing competitiveness.
United States: US multinationals with EU subsidiaries face fewer due diligence hurdles but must meet CSRD standards for market access.
India: Exporters to the EU (steel, cement, textiles) benefit from CBAM exemptions for small shipments and lighter CSDDD supply chain scrutiny. Large firms with EU operations must still align with CSRD’s new thresholds.

Balancing the Green Deal with Competitiveness

The EU Omnibus Directive doesn’t waver from the Green Deal’s goals. As von der Leyen emphasized, “sustainability and competitiveness should go hand in hand.” By addressing stakeholder concerns—overly complex rules, high costs, and limited investor utility—the package makes sustainability pragmatic, driving investment and jobs while advancing the EU’s climate agenda.

Challenges and Opportunities

Opportunities: Simplified rules free resources for innovation, exemptions level the playing field, and voluntary standards encourage proactive reporting.
Challenges: Reduced transparency may concern investors, ongoing legislative debates create uncertainty, and firms invested in prior compliance face adjustments.

How Can Sprih Help?

At Sprih, we specialize in turning regulatory complexity into actionable solutions. Here’s how we support companies in India, the US, and Europe:

End-to-end Sustainability Management: Our AI-native sustainability management platform tracks, manages Scope 1, 2, and 3 emissions, aligning your organizations with CSRD and CBAM requirements.
Sustainability Reporting: We tailor CSRD and Taxonomy compliance strategies, leveraging VSME standards for SMEs and simplifying ESRS for larger firms.
Due Diligence Support: We streamline CSDDD compliance, focusing on direct suppliers and minimizing value chain burdens.
Future-Proofing: With CBAM reviews and Taxonomy consultations underway, we keep you ahead of evolving rules.

The Road Ahead

The EU Omnibus Directive is a work in progress—subject to European Parliament and Council negotiations. Its final shape will emerge over 2025. For now, proactive adaptation is key.

Sprih stands ready to guide you through this shift. Whether you’re measuring emissions, reporting sustainability, or optimizing your supply chain, we’re your partner in thriving under the EU Omnibus. Get in touch with Sprih’s experts to explore how these changes impact your business—and how we can help you succeed.

From Brussels to the World: How the EU Omnibus Directive Reshapes Sustainability Reporting