EU Omnibus Package: what does it mean for businesses?

Regulatory overhaul: a lifeline or a new headache?

The European Commission unveiled the long-awaited EU Omnibus package on 26 February 2025, a sweeping reform aimed at simplifying sustainability-related reporting obligations. Businesses operating in the EU will see changes to key regulatory frameworks, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy. The package also impacts the EU Carbon Border Adjustment Mechanism (CBAM).

 

Reducing regulatory burdens: but for whom?

The EU Omnibus package is positioned as a response to long-standing concerns from businesses about regulatory complexity and compliance costs. The European Commission, in its Competitiveness Compass, has committed to reducing reporting burdens by at least 25% for all companies and 35% for SMEs. For businesses, this should mean fewer administrative hurdles, but the devil is in the details.

While the stated aim is simplification, companies that have already invested heavily in adapting to existing reporting frameworks may find themselves at a disadvantage. The risk of policy reversals could create uncertainty, impacting long-term planning and investment decisions. Multinational corporations navigating multiple jurisdictions will need to assess how these changes align with broader global regulatory trends.

The scope of CSRD and CSDDD is now fully aligned, with an employee threshold of 1,000. This change means that 80% of companies previously subject to “very burdensome reporting” will no longer have to comply, according to the European Commission. Additionally, companies that have not yet reported but remain in scope will benefit from a two-year “stop-the-clock” delay, giving them more time to prepare.

 

So, what does this change?

In short, the EU Omnibus package scales back sustainability reporting obligations under CSRD, CSDDD, and the EU Taxonomy. It delays CSRD reporting by two years for many companies, eliminates sector standards, and aligns the scope with CSDDD at 1,000+ employees. CSDDD now focuses only on direct business partners, extends assessment intervals to five years, and removes EU-wide civil liability. Taxonomy reporting is now only for very large companies, exempting 80% of firms. This shift reduces burdens but raises concerns over ESG commitments.

 

The EU Omnibus Package in the context of EU competitiveness

The EU Omnibus Package is a direct response to the Draghi Report on European Competitiveness, which identified fragmented sustainability reporting requirements as a barrier to investment and economic growth. The Commission’s Competitiveness Compass reiterates this, advocating for an ‘unprecedented simplification effort’ to unlock capital and innovation.

Yet, the broader debate is whether simplification translates into deregulation. Brussels’ push for reducing regulatory burdens has been met with skepticism by some policymakers and industry leaders who worry that it could erode the environmental and social governance (ESG) framework that the EU has championed.

Key changes include the removal of sector-specific sustainability reporting standards under the CSRD and a review of ESRS (European Sustainability Reporting Standards, the EU’s mandatory ESG disclosure framework) to further streamline disclosures. Additionally, the EU Taxonomy reporting requirements will now apply only to “very large companies,” aligning with the 1,000-employee threshold.

For businesses, this reform signals a shift towards a more pragmatic regulatory approach, but it also raises questions. Will simplification translate into meaningful cost reductions, or will it create further compliance ambiguities?

The CSDDD will now focus exclusively on direct business partners, rather than the entire value chain. Due diligence assessment intervals will be extended from one year to five years, and penalties will no longer be directly linked to a company’s net turnover. Additionally, the EU has moved away from imposing an EU-wide civil liability framework, reducing litigation risks for businesses.

 

Divisions within industry and policy circles

While some European finance ministers have backed the EU Omnibus package, arguing that it will cut red tape and enhance business efficiency, the response from industry has been mixed. Large corporations, including those in finance and manufacturing, have warned that shifting requirements could undermine investment certainty. Investors and ESG-focused businesses worry that the package could dilute sustainability commitments.

On the other hand, SMEs and industry associations have long called for regulatory relief, particularly in sustainability reporting, which they argue places a disproportionate burden on smaller firms. While the proposed package could offer much-needed flexibility, concerns persist about how national governments will interpret and implement these changes.

At the Antwerp Industry Summit, a business leader remarked that the message had not convinced everyone in the room, as discussions with CEOs revealed. Many are still waiting for a more concrete framework. Business leaders at the summit called the proposal a step forward but urged immediate action on market creation, technological neutrality, and cutting red tape. Some emphasized that it simplifies future rules rather than deregulating, but real improvements are still needed.

With the alignment of CSRD, CSDDD, and Taxonomy reporting thresholds at 1,000 employees, businesses now face a more consistent but narrower compliance landscape. However, the two-year delay for companies that have not yet reported adds a layer of uncertainty, as firms may need to adjust compliance strategies mid-transition.

 

Next steps: strategic considerations for businesses

The months that follow will determine whether this reform translates into tangible benefits or additional layers of uncertainty for businesses.

Companies should be preparing for multiple scenarios: a streamlined compliance landscape that reduces reporting costs, or a transitional period of regulatory ambiguity that requires additional legal and strategic adjustments.

While the EU aims to maintain its position as a global leader in sustainable finance and corporate responsibility, the EU Omnibus Package underscores a broader tension: how to balance competitiveness with the regulatory framework of the European Green Deal. The removal of an EU-wide civil liability framework under CSDDD and the shift to a more proportionate penalty regime suggest a significant softening of compliance risks. Businesses must stay engaged with policymakers to ensure their interests are reflected in the final implementation.