For months, the business world had been awaiting an update to the European ESG regulatory framework. On one hand, many companies were calling for reduced bureaucratic complexity to remain competitive; on the other, investors aimed to uphold high transparency standards. The European Commission has sought to balance these needs with the first Omnibus package—a reform […]
For months, the business world had been awaiting an update to the European ESG regulatory framework. On one hand, many companies were calling for reduced bureaucratic complexity to remain competitive; on the other, investors aimed to uphold high transparency standards. The European Commission has sought to balance these needs with the first Omnibus package—a reform designed to reshape the corporate sustainability landscape, which, at least in terms of reporting, appears to “freeze” the current situation.
Presented on February 26, the reform proposes a substantial revision of key sustainability regulations with a focus on simplification. The proposal addresses three key aspects of ESG regulation:
- The Corporate Sustainability Reporting Directive (CSRD), which governs the sustainability reporting obligations for European companies.
- The Corporate Sustainability Due Diligence Directive (CSDDD or CS3D), which defines corporate responsibilities regarding human rights and environmental impacts along the supply chain.
- The EU Taxonomy, which establishes which economic activities can be classified as sustainable.
The European Union’s direction is clear: less bureaucracy, more focus on large enterprises, and greater flexibility for small and medium-sized enterprises (SMEs).
What are the main changes introduced by the Omnibus package?
The Omnibus package modifies the CSRD criteria by narrowing the number of companies required to report on sustainability. The new thresholds set the minimum requirement at 1,000 employees and €50 million in revenue, or €25 million in assets, excluding around 80% of previously covered businesses.
Additionally, the mandatory reporting deadline for in-scope companies has been postponed by two years, meaning they will have to start reporting in 2028 instead of 2026 or 2027.
Companies no longer subject to the CSRD may opt for a voluntary standard, based on the SME framework, which will limit the amount of required information requested by companies or banks still within the CSRD scope.
The CSDDD undergoes changes in two key areas:
- Limited oversight to direct suppliers: Companies will no longer need to monitor the entire supply chain, only their direct suppliers.
- Less frequent assessments: Mandatory ESG evaluations will shift from annual to once every five years, reducing continuous monitoring.
Furthermore, EU-wide civil liability is removed, leaving it up to individual member states to determine compensation mechanisms in case of violations. This could lead to regulatory fragmentation.
New reporting thresholds: Between the risk of less transparency and the challenge of balancing sustainability and competitiveness
It is important to note that the Omnibus package is still only a proposal that must be approved by the European Parliament and Council. The process could take 4 to 7 months, and only then will it be implemented by member states. Therefore, the transition will not be immediate, making it crucial to closely monitor regulatory developments to help businesses adapt to an evolving landscape.
Professor Mario Calderini, a professor at the Politecnico di Milano and spokesperson for Torino Social Impact, warns of a dangerous underlying message in the proposal—that competitiveness and sustainability are at odds. He also highlights the risk that excessive simplification of the various directives could ultimately weaken them and reduce transparency.
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