Understanding the Omnibus Simplification Package and its impact on sustainability reporting

The European Commission has published the long-anticipated EU Omnibus Simplification Package. It introduces significant changes, scaling back or delaying key sustainability reporting legislation. The proposed amendments mark a major change in the direction of EU climate policy.

Why is the EU proposing these changes? 

As the start of its new five-year term, the European Commission declared EU competitiveness a top priority. On November 8, 2024, EU leaders adopted the Budapest declaration, which lays out a new European Competitiveness Deal. The European Commission outlines five activities as enablers for competitiveness:

• Simplification
• Lowering barriers to the Single Market
• Financing competitiveness
• Promoting skills and quality jobs
• Better coordination of EU and national policies

The Omnibus Package is the first major step in this strategy. The EU has developed flagship climate legislation to support its Green New Deal ambitions — the ‘EU Omnibus package’ aims to simplify this legislation as a response to concerns that an undue burden of data collection and reporting will drive a lack of competitiveness in the EU.

What will change under the Omnibus Package?

The EU has set the global standard for sustainability reporting, but some argue that existing policies have been developed in isolation, with overlapping requirements that are impractical for smaller organisations. Supporters of the proposed amendments believe that cutting reporting complexity will enhance EU competitiveness, while critics warn of a major step back from climate accountability.

Four key pieces of legislation affected by the Omnibus Package include:

• Corporate Sustainability Reporting Directive (CSRD)
• Corporate Sustainability Due Diligence Directive (CSDDD)
• EU Taxonomy
• Carbon Border Adjustment Mechanism (CBAM)

The Omnibus proposal seeks to reduce reporting burdens by 25% and 35% for large companies and SMEs respectively.

Proposed amendments to CBAM, CSRD, CSDDD, and the EU Taxonomy

Let’s take a closer look at the key amendments impacting each legislation.

Corporate Sustainability Reporting Directive (CSRD)

The CSRD is the most extensive and complex set of sustainability standards of any jurisdiction globally. In place since 2023, the directive mandates companies to analyze external impacts and the risks externalities pose to their business, and report on key metrics in a transparent and consistent way. Its implementation was scheduled to roll out in four phases between now and 2029, starting with listed companies, followed by large unlisted companies, SMEs, and finally, non-EU parent companies of large corporations.

The Omnibus Package proposes substantial changes to the CSRD:

• Higher reporting thresholds — Only companies with more than 1,000 employees and either revenue above €50 million or a balance sheet over €25 million would need to report. This change excludes an estimated 80% of previously in-scope companies.
• Extended compliance deadlines — The timeline for reporting obligations would be delayed by two years, giving companies more time to establish data collection frameworks.
• Sector-specific reporting eliminated — Planned industry-specific standards would be removed, simplifying reporting requirements.
• Assurance requirements scaled back — Only limited assurance would be required, ending speculation about stricter verification rules.
• Protection for SMEs — Smaller suppliers (<1,000 employees) would not need to provide data unless they choose to opt in.
• Fewer required data points — The ESRS (European Sustainability Reporting Standards) would simplify reporting frameworks, requiring fewer data disclosures.

Corporate Sustainability Due Diligence Directive (CSDDD)

The CSDDD establishes a legal framework for conducting due diligence on sustainability issues, including climate impacts and human rights violations, within a company’s supply chain. Although the EU Parliament has ratified the directive, not all member states have incorporated it into national law. Its implementation for the largest companies was originally scheduled for 2027.

The Omnibus Package proposes significant rollbacks:

• Implementation pushed to 2028 — Large companies would now have until 2028 to comply with due diligence requirements.
• Scope limited to tier 1 suppliers— Companies would only need to assess direct suppliers, reducing the depth of required due diligence.
• Civil liability left to member states — The EU-wide liability framework would be dropped, with individual states determining enforcement.
• Penalty caps introduced — A maximum fine limit would prevent national governments from setting stricter financial penalties.

EU Taxonomy

The EU Taxonomy serves as the classification system for environmentally sustainable economic activities, guiding businesses and investors toward climate-friendly investments. It defines which economic activities qualify as sustainable and mandates companies to disclose how much of their revenue, capital expenditure (CapEx), and operational expenditure (OpEx) align with these criteria. Initially designed to drive capital toward green projects, the taxonomy has been widely criticized for its complexity and rigid criteria, particularly for mid-sized businesses.

The Omnibus Package introduces adjustments to the EU Taxonomy framework:

• Voluntary reporting for mid-sized companies — Businesses with turnover below €450 million can opt for voluntary reporting.
• Partial alignment allowance — Companies can report partial alignment with taxonomy objectives rather than full compliance.
• Simplified templates — Streamlining of disclosures, including combined reporting for Do No Significant Harm (DNSH) and nuclear/fossil gas activities.

Carbon Border Adjustment Mechanism (CBAM)

CBAM is the EU’s carbon pricing mechanism, designed to work alongside the existing EU Emissions Trading System (ETS), for imported goods. It aims to prevent carbon leakage and ensure that non-EU producers pay a comparable carbon price to EU manufacturers. The mechanism covers carbon-intensive sectors such as steel, aluminum, cement, fertilisers, electricity, and hydrogen, requiring importers to purchase CBAM certificates based on the emissions embedded in their products. The system was set to gradually phase in through 2026, but businesses have expressed concerns over its complexity and administrative burden.

Among the most significant amendments in the Omnibus Package are proposed changes to CBAM, aiming to reduce compliance complexity for importers and exporters:

• De minimis threshold — Small importers handling <100t CO2e or 50 tonnes of material annually would be exempt from CBAM obligations. This would exclude 90% of the current importers of CBAM covered goods, while still capturing 99% of emissions imported into the EU.
• Simplified processes for large importers —
  
  • Making the consultation step optional in the authorisation process.
  • Allowing third-party delegation for CBAM declarations.
  • Excluding non-calcined kaolinic clays from CBAM scope.
  • Focusing CBAM calculations on direct emissions from electricity use.
• First-year flexibility — Instead of mandatory CBAM certificate purchases by the end of 2026, importers would have until February 2027 to comply.‍
• CBAM certificate management revisions — The current 80% certificate holding requirement may be reduced to 50%, easing financial burdens.

What’s next? Legislative process and potential changes

The Omnibus Simplification Package has now entered the legislative process, where it will undergo scrutiny and possible amendments from the European Parliament and the EU Council. The legislative timeline includes:

While this process is underway, businesses should prepare for further changes, as negotiations may result in additional modifications before the final directive is enacted.

What the metals, energy, and manufacturing sectors should do next

Despite the potential for adjustments, businesses cannot afford to delay their sustainability strategies. We recommend the following actions:

1. Continue reporting preparation. The CSRD, CSDDD, and CBAM frameworks remain in force, and businesses should maintain current compliance efforts until formal amendments are confirmed.

2. Monitor updates closely. Given the ongoing legislative process, keeping up with changes is crucial. CarbonChain will provide updates as new information emerges.

3. Assess CBAM exposure. Even with proposed simplifications, CBAM compliance remains a major obligation for companies trading with the EU.

4. Leverage accurate carbon data. Businesses should ensure they have high-quality, asset-level emissions data to manage compliance efficiently and remain competitive.

What impact can we expect?

These changes have sparked debate. It remains to be seen whether this rebalancing of reporting requirements will reflect a more realistic pace of transition — an answer to ‘Is too much, too soon doing more damage than good?’ — or if it will prove merely a rollback of much-needed regulatory control, enabling polluters to continue polluting in an increasingly fractured world.

At CarbonChain, we know that quality Scope 3 carbon accounting remains essential, regardless of shifting policies. Businesses must continue to understand their emissions, manage risks, and prepare for long-term sustainability compliance — not just meet minimum requirements.

The Omnibus proposal is still under negotiation, and revisions are likely before final adoption. Companies should maintain their sustainability strategies. Stay informed. Stay compliant. Stay competitive. Contact us to learn more about how CarbonChain can help your business navigate evolving EU sustainability regulations.