EU ESG Omnibus: A Guide to Adjusted Sustainability Regulations
The European Commission has introduced the ESG Omnibus proposal, also referred to as the “Simplification Package,” which modifies regulations across the EU. This proposal addresses key frameworks, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy, with additional updates to the Carbon Border Adjustment Mechanism (CBAM).
This initiative aligns with the EU’s Competitiveness Compass, which seeks to adjust the region’s economic framework by altering regulatory requirements, particularly for small and medium-sized enterprises (SMEs). The proposal has prompted varied responses from civil society and business groups—while some stakeholders welcome the reduced administrative demands, others express concern that it could weaken the EU’s sustainability efforts. Below are the primary changes and their potential implications for businesses.
Changes to CSRD Reporting Requirements
80% Scope Reduction: the CSRD now applies only to companies with more than 1,000 employees and a net turnover of €450 million, decreasing the number of affected companies from approximately 50,000 to 7,000, aligning with the CSDDD’s scope.
Modified Reporting Standards: sector-specific standards have been removed, and the initial set of ESRS, will be revised to reduce the number of mandatory data points.
Changes to Assurance and Implementation Timelines:“Limited assurance” is now required instead of the more rigorous “reasonable assurance” previously proposed. Companies new to reporting receive an additional two years for companies to comply.
Adjusted Due Diligence Under CSDDD
The CSDDD establishes accountability within supply chains. The Omnibus proposal modifies its requirements while retaining its core objectives:
Focus on Direct Suppliers: companies must perform due diligence on direct suppliers, with additional checks required only when credible evidence suggests risks further down the chain.
Less Frequent Monitoring: supply chain monitoring is now required every five years instead of annually.
Adjustments for Smaller Businesses: the proposal limits the data companies can request from SMEs and small mid-cap partners. Financial services are permanently excluded from the directive’s scope.
Consistency Across the EU: Member States are prohibited from introducing stricter national regulations (“gold plating”). EU-wide civil liability is removed, and the penalty framework is revised.
Climate Transition Plans: companies are still required to develop climate transition plans, aligned with CSRD requirements.
Extended Implementation Timelines: the transposition period is delayed by one year, and the directive’s applicability is postponed by an additional year.
Modified Taxonomy Reporting
The EU Taxonomy classifies sustainable economic activities. The Omnibus proposal adjusts its requirements as follows:
Aligned Scope with CSRD: taxonomy reporting applies only to companies with over 1,000 employees and €450 million in turnover, consistent with the CSRD’s revised scope.
Adjusted Reporting Options: companies may soon report on activities meeting some, but not all, Taxonomy technical screening criteria, which could alter how sustainability efforts are presented.
Reduced Data Requirements: the number of required data points is cut by 70%.
Delayed Implementation: companies new to Taxonomy reporting receive a two-year delay in implementation.
CBAM Updates: Changes to Compliance for Importers
Although not formally part of the Omnibus proposal, CBAM updates in the annexes modify compliance for importers:
New Exemption Threshold: importers of less than 50 tons of carbon-intensive goods annually are exempt from CBAM requirements. This threshold, recalculated yearly, may exclude about 90% of importers (approximately 182,000 businesses).
Adjusted Processes: the proposal modifies declarant authorization, emissions calculations, reporting obligations, and financial responsibilities.
Balancing Simplification and Sustainability Goals
The ESG Omnibus proposal adjusts regulatory complexity as part of an effort to address EU competitiveness.
The proposal awaits review by the European Parliament and the Council of the EU, where further revisions are possible. Businesses should monitor these developments, as the final outcome could affect reporting timelines, supply chain strategies, and sustainability commitments.
For more information on how QIMA can help you manage your ESG goals, contact us today.
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