Frequently Asked Questions: The EU Omnibus Package

The European Commission’s Omnibus Proposal, announced on 26 February, 2025, represents a significant recalibration of sustainability regulations in the EU. It aims to simplify compliance requirements while maintaining the broader goals of sustainability and corporate accountability. Below are answers to some of the most frequently asked questions about this proposal.

Explore our full CSDDD guide for more Omnibus updates

What is the EU Omnibus Proposal Package?

The Omnibus Proposal is a legislative initiative by the European Commission designed to streamline and simplify key sustainability regulations under the European Green Deal. It introduces amendments to several directives and mechanisms, including:

Corporate Sustainability Reporting Directive (CSRD): Governs how companies report on environmental, social, and governance (ESG) impacts.

Corporate Sustainability Due Diligence Directive (CSDDD): Focuses on human rights and environmental due diligence in supply chains.

EU Taxonomy Regulation: Defines environmentally sustainable activities to prevent greenwashing.

Carbon Border Adjustment Mechanism (CBAM): Imposes levies on carbon-intensive imports.

The package aims to reduce administrative burdens for businesses while preserving sustainability objectives.

Why Was the Omnibus Proposal Developed?

The proposal was developed in response to concerns about the complexity and cost of compliance with existing sustainability regulations. Businesses, especially small and medium-sized enterprises (SMEs), faced significant challenges in meeting overlapping requirements from multiple directives. The Omnibus Proposal seeks to:

• Simplify reporting obligations
• Reduce compliance costs by up to 25% for large companies and 35% for SMEs
• Strengthen Europe’s competitive position without compromising its decarbonisation goals

What Is the Timeline for Implementation?

The legislative process for the Omnibus Proposal involves several stages, including reviews by the European Parliament and Council, negotiations, and final approval. While the timeline remains uncertain, typical EU legislative processes can take years. Recent developments under the "Stop-the-Clock" Directive, part of the Omnibus Simplification Package, have clarified key delays to compliance timelines:

CSRD: Reporting deadlines for second-wave companies have been postponed by two years. Companies initially required to report for financial years starting in 2025 will now begin reporting in 2027, with publication in 2028. Similarly, listed small and medium-sized enterprises (SMEs) will start reporting one year later for their 2028 financial year, to be published in 2029.

CSDDD: The transposition deadline for member states has been extended by one year to 26 July, 2027. Large EU companies and equivalent non-EU companies will now begin complying with due diligence obligations starting in July 2028.

These delays provide businesses additional time, the broader Omnibus Proposal continues to face intense debate regarding its scope and simplifications, leaving businesses with ongoing uncertainty about potential future changes.

What Changes Are Proposed for the CSRD?

The Omnibus Proposal significantly narrows the scope of the CSRD:

• Higher Thresholds: The directive now applies only to companies with more than 1,000 employees and meeting turnover or balance sheet criteria. This change removes up to 80% of previously covered entities from mandatory reporting.
• Simplified Reporting Standards: The European Sustainability Reporting Standards (ESRS) will be revised to reduce data points and clarify provisions
• Voluntary Reporting: Smaller companies below the thresholds can opt into voluntary reporting

These changes aim to alleviate compliance burdens but may reduce transparency in corporate sustainability performance.

What Changes Are Proposed for the CSDDD?

The Omnibus Proposal introduces significant revisions to the CSDDD:

• Focus on Tier 1 Suppliers: Due diligence obligations are limited primarily to direct suppliers, reducing monitoring efforts across entire supply chains.
• Reduced Frequency of Assessments: Companies would now be required to conduct assessments every five years instead of annually.
• Civil Liability Decentralization: Harmonised liability provisions are replaced with member state-specific frameworks, introducing variability across jurisdictions.

These changes simplify compliance but raise concerns about fragmented enforcement and reduced accountability.

How is LkSG Being Affected by CSDDD and the Omnibus?

Germany’s incoming coalition government announced early April 2025 their  plans to repeal the Supply Chain Due Diligence Act (LkSG), eliminating reporting obligations immediately and pausing enforcement of due diligence requirements—except in severe human rights cases—until the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) takes effect. However, under the Omnibus proposals, the CSDDD won’t be implemented until 2028, creating uncertainty for compliance teams. While the repeal reduces short-term regulatory burdens, companies face a challenging gap as they prepare for stricter EU rules in the years ahead.

Why Are Compliance Teams Concerned About These Changes?

Compliance teams face several challenges under the proposed amendments:

Regulatory Uncertainty: The proposal is still subject to negotiation and approval, leaving businesses unsure about final requirements.

Reduced Transparency: Narrowing reporting scopes may limit access to critical ESG data needed for risk management and stakeholder engagement.

Fragmented Liability Frameworks: Decentralised civil liability provisions could complicate cross-border operations and increase legal risks.

Despite reduced obligations, companies must remain vigilant in aligning their policies with evolving expectations from investors and global stakeholders.

How Will These Changes Impact Businesses?

The impact varies depending on company size and industry:

• Large Enterprises: While reporting thresholds have increased, large entities remain subject to rigorous due diligence under CSDDD and CBAM regulations.
• SMEs: Many SMEs are exempt from mandatory reporting but may voluntarily comply to meet investor expectations or prepare for future regulations.
• Multinational Corporations: Fragmented liability frameworks may complicate operations across multiple jurisdictions, requiring tailored compliance strategies.

Businesses should reassess their ESG frameworks proactively rather than waiting for finalised legislation.

What Are Critics Saying About the Proposal?

Critics argue that while simplification reduces administrative burdens, it risks undermining sustainability objectives:

• Weakened Safeguards: Scaling back disclosures may hinder investors’ ability to assess risks and businesses’ capacity to manage sustainability challenges effectively.
• Greenwashing Risks: Reduced transparency could lead to misleading practices in ESG reporting.
• Regulatory Instability: The rushed nature of the proposal has generated uncertainty among stakeholders, potentially delaying sustainability investments.

Civil society organisations have expressed concerns that these changes erode corporate accountability commitments essential for achieving EU Green Deal targets.

What Should Businesses Do Now?

In light of these proposed changes, businesses should take proactive steps:

• Revisit due diligence policies under CSDDD to maintain robust supply chain oversight mechanisms despite uncertainty
• Monitor legislative developments closely as negotiations progress through EU institutions

Companies must balance regulatory flexibility with long-term ESG commitments to ensure resilience against evolving stakeholder expectations.

Conclusion

The EU Omnibus Proposal reflects a recalibration rather than a retreat from sustainability goals. While it simplifies compliance requirements, businesses must remain mindful of broader ESG expectations from investors, consumers, and regulators. By leveraging new flexibilities strategically, organisations can strengthen their ESG frameworks while navigating these regulatory shifts effectively.

Compliance professionals should view these changes as an opportunity—not merely a challenge—to refine their approaches toward sustainable business practices that align with both legal mandates and societal demands.

Interested in learning more about the Omnibus, and how to address CSDDD in your compliance program? Check out our updated guide!