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In this new edition of Insights+, BSR explores key provisions of the Omnibus proposal, what happens next, how businesses should respond, and offers a deep dive into sustainability reporting and action.
Key Points
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Companies should remain focused on the core elements of the European regulatory framework, and leverage the opportunity to cement a strategic, enterprise-wide approach that delivers value and resilience, despite current institutional delays and uncertainty.
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BSR believes it is essential that certain core principles be sustained in this ongoing process—including risk-based due diligence, double materiality, and implementing Climate Transition Plans—enabling companies to move from commitment to credible action.
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Now that the Omnibus is out, it is essential that companies refocus again from compliance to delivering impact.
What Business Leaders Need to Know
On February 26, 2025, the European Commission proposed significant adjustments to corporate sustainability regulations through an Omnibus Simplification Package, following through on its earlier announced plan to streamline reporting requirements in three EU Green Deal laws: the EU Taxonomy, the Corporate Sustainability Reporting Directive (CSRD), and the Corporate Sustainability Due Diligence Directive (CSDDD). The proposed changes also affect the Carbon Adjustment Mechanism (CBAM) and the InvestEu Regulation.
The package introduces the following key changes, on which we elaborate in subsequent sections:
- A two-year delay for companies that would have been required to report under CSRD in 2026 and 2027, a one year delay in transposition of CSDDD to 2027, and a one year delay in due diligence obligations for the largest companies to 2028.
- The introduction of an opt-in option for Taxonomy reporting together with a materiality threshold to conduct taxonomy assessments.
- A reduction of the number of companies in-scope by increasing thresholds (e.g., 80 percent reduction for CSRD, 90 percent reduction for CBAM).
- A possible revision of the European Sustainability Reporting Standards (ESRS) to prioritize quantitative information over qualitative, providing for materiality guidelines amongst other components.
- The obligation to conduct double materiality remains.
- Limited assurance requirements are maintained with targeted assurance guidelines to be published by the Commission in October 2026.
- The rollout of voluntary sustainability reporting for SMEs no longer in scope, and the capping of information requests for voluntary ESRS standards for SME (VSME).
- Removal of the requirement to prepare sector-specific standards.
- Under the CSDDD, a proactive due diligence requirement for direct business partners, and reactive due diligence for indirect partners. The financial penalty of 5% of net turnover is removed with civil liability governed by national law.
- Climate Transition Plans remain, however the obligation to implement them is removed.
The legislative proposals will be sent to the European Parliament and the Council for review and approval. The amendments will take effect once both co-legislators reach an agreement, and the final text is published in the EU Official Journal. The Commission invites the co-legislators to treat the Omnibus package as a priority and Member States will be required to transpose by December 31, 2025.
Authors
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Managing Director, Transformation, BSR
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Associate Director, Transformation, BSR
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Associate Director, Climate and Nature, BSR
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Manager, Transformation, BSR
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Manager, EU Reporting, BSR
Topics
What This Means For Sustainable Business
Unpacking the Implications for CSRD and EU Taxonomy
The Omnibus postpones the application of reporting requirements under CSRD for companies due to report in 2026 and 2027 and reduces the number of companies in-scope by approximately 80 percent, aligning with the scope of CSDDD. Companies in scope include European companies with more than 1,000 employees (instead of 250) and either a €50 million turnover or a €25 million balance sheet, while the net EU turnover threshold for non-EU companies increases from €150 million to €450 million.
Reporting on full or partial alignment with the EU Taxonomy would be voluntary for CSRD-reporting companies with turnover below €450 million, while data points would be cut by nearly 70 percent, and there would be no need to assess activities deemed immaterial (below 10 percent of total turnover, capital expenditure, or assets).
Our EU Omnibus Fact Sheet provides members with an overview of existing and emerging sustainability regulations, including CSRD, CSDDD, EU Taxonomy and CBAM.
Access requires a BSR member login.
Companies with fewer than 1,000 employees would not be required to report under CSRD, though they may do so using the voluntary reporting standards based on EFRAG’s recently published Voluntary Reporting Standards for SMEs (VSME). In addition, the information that CSRD-complying companies or banks can request from companies in their value chains with fewer than 1,000 employees will be limited by VSME. This would limit the ability of companies in scope of CSRD to access data on material impacts commonly found in value chains. For example, the VSME does not require disclosure of living wage in supply chains.
Companies conducting due diligence under CSDDD would also be required to limit their data requests of SMEs with fewer than 500 employees to the VSME standards, unless additional information on impacts not mentioned in the VSME is necessary and not available through other reasonable means. While the Omnibus states that reopening ESRS seeks to “improve consistency with other pieces of EU legislation”, this limitation introduces confusion, legal risks, and the wrong incentives as the same companies may request supplier data on human rights and environmental impacts beyond the VSME as part of CSDDD compliance.
The Omnibus also proposes reopening the ESRS to reduce the number of data points and simplify unclear provisions and suggests eliminating sector-specific sustainability reporting. This reduction includes eliminating “the least important data points” and emphasizes quantitative data over qualitative text. Emphasizing quantitative data could lead companies to prioritize data gathering and reporting on financial risks, opportunities, and quantitative environmental data over material impacts on the human rights of workers, communities, consumers, and end-users.
Sector-specific standards are no longer planned for adoption. While removing sector standards may help reduce the reporting burden for companies, this may be a missed opportunity for providing much-needed guidance to help companies focus their double materiality assessments and reporting practices.
Double materiality is maintained and Omnibus proposes developing further guidance on applying the materiality principle. Additional clarity on how to set coherent impact materiality thresholds would be helpful to business. This is needed to align business functions—such as reporting teams and issue-specific technical experts—and consistent application of “severity” and “likelihood” criteria in prioritizing impacts for action and for disclosure.
Limited assurance is also maintained with the expectation of reasonable assurance removed, which hopefully will minimize excessive costs and compliance burdens by businesses associated with current auditing practices.
Sustainability Action: Changes to the CSDDD
The Omnibus proposes significant changes to the CSDDD, including delaying its transposition until 2027 and compliance for the largest companies until 2028. Among other things, it also changes the scope of value chain due diligence, extends monitoring requirements, and removes civil liability.
We note with concern that proposed changes to the CSDDD break with the pragmatic and ongoing risk-based due diligence approach in the current directive and laid out in the Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Right (UNGPs). This disconnect interferes with progress made to achieve international policy coherence and interferes with the need for regulatory consistency.
The proposed due diligence approach is highly likely to increase costs and administrative burdens for in-scope companies. If adopted, companies would be required to conduct full due diligence of their operations, subsidiaries, and direct business partners in the chain of activities. By focusing on Tier 1, companies would be required to conduct proactive, in-depth assessments of and engage all Tier 1 business partners. This stands in contrast to the current law, where companies map their value chains and consider a range of risk factors to help them narrow their attention on and engage with a select number of higher-risk areas and partners for further assessment. This may exclude all Tier 1 partners as well as large value chain segments.
Where “plausible information” exists, the Omnibus also proposes reactive in-depth assessments of indirect partners, and where relevant, taking action on impacts throughout the chain of activities. Not only is information on human rights and environmental impacts in many cases already available, it will become ubiquitous as more complaints, NGO reports, incident alerts, and other data sources designed to provide plausible information surge.
The proposed due diligence approach increases burden on low-risk and SME value chain partners. The Commission recognizes that requiring full due diligence of Tier 1 partners would also “increase the burden of many European SMEs as they are often first-tier value chain suppliers of the companies in scope of the Directive, while they may be low-risk themselves and would therefore not bear too much burden under the risk-based approach of the CSDDD as currently in force.”
To mitigate this, companies must limit data requests to SMEs with fewer than 500 employees to the data points in the CSRD’s VSME Standard, unless more information is necessary on impacts not covered in the standards and where such information cannot otherwise be reasonably obtained. There is a discrepancy with the CSRD’s employee cap of 1,000 employees, while the VSME standard does not comprehensively cover all impacts in scope of the CSDDD, both of which add complexity.
Lastly, while Climate Transition Plans (CTPs) remain, removing the requirement to implement these plans removes the obligation for companies to act in response to a rapidly warming planet. It also risks rewarding those that adopt but fail to implement CTPs, undermining investor confidence and public trust while weakening business and value chain resiliency. Delinking the requirement to conduct a CTP from the requirement to implement further risks turning the CTPs into a ‘paper exercise’ that does not maximize the precision or impact of CTPs.
Actions for Business to Maintain Momentum on Sustainability
We believe that companies should stay focused on the core elements of the European regulatory framework, and leverage the opportunity to cement a strategic, enterprise-wide approach that delivers value and resilience. Many of the core principles present before the Omnibus was proposed remain important. Companies are well-advised to stay on the path sketched out in Brussels, even as timeframes and some requirements may change, and keep an eye on growing sustainability product related requirements not in scope of Omnibus.
- Continue the important momentum of leveraging regulations to build long-term business value. The EU has been a global force for promoting comprehensive and interoperable sustainability due diligence and disclosure embedded in business, with clear governance accountability. Companies that have been subject to the EU regulatory framework, especially those in the first wave of CSRD reporting based on FY2024 in 2025, now have a head start on actions that will improve business resilience and innovation needed to be competitive in a fast-changing, ever disruptive world. Halting or pausing undermines the investments and growing pains that companies have gone through to transform ‘business-as-usual’ to cross-company value creation.
- Pursue double materiality despite Omnibus delays to understand impact, risks, and opportunities material to the business. While the EU may be simplifying applicable ESRS for large companies, double materiality has proven for many companies to be an excellent cross-functional exercise to understand impacts, risks, and opportunities (IROs), align them with enterprise risks, formulate a focused list of material topics, engage affected stakeholders in a structured way, collect data across the organization, and raise governance oversight aligned with long-term business value. The failings of double materiality in many cases have related to the burden of endless IROs, unclear thresholds, ‘tick the box’ compliance auditing that has not respected the spirit of CSRD limited assurance, in the absence of expertise and available resources.
- Implement robust risk-based due diligence in line with the OECD Guidelines and UNGPs to help focus attention and resources where the most severe impacts are and prepare for current and future stakeholder demands.
- Continue to invest in climate transition plans, including credible implementation. Climate action plans are valuable means of strengthening business resilience in the face of rising climate risks, generating innovative opportunities related to the energy transition, and addressing expectations from investors and civil society. While the Omnibus does not require implementation of CTPs, it is in every companies’ interest to generate plans that are realistic and implementable. CTPs can enable companies to move from commitments to delivery going beyond climate pledges and targets.
- Maintain current cross-company and governance upskilling up to the board of directors on human rights and environmental issues tied to long-term business strategy.
- Engage stakeholders across the value chain proactively, not reactively. Identify and map your value chain, including affected stakeholders likely to be the most vulnerable to impacts in connection with company’s own activities and operations and value chain. Anticipate risks and build resilience by preparing, engaging, and activating your stakeholders in a structured way aligned with strategic business needs.
- Use foresight to navigate current uncertainty and look to the long-term. Companies should make good use of scenario planning, simulations, and other foresight tools, especially at management and board level to stay focused on business value in an uncertain environment.
- Anticipate growing product sustainability related requirements alongside reporting and due diligence. For example, the Ecodesign for Sustainable Products Regulation which entered into force in July 2024, the Packaging and Packaging Waste Regulation which entered into force in February 2025, and the long delayed EU Deforestation Regulation, which is expected to enter into force by year end.
Conclusion
The Omnibus was adopted in the name of European competitiveness. This is an important opportunity to return to a focus on delivering impact. The regulations are not an end in themselves, they are a means to the goal of a just and sustainable world. Companies have been pre-occupied with preparations for CSRD, CSDDD, and other elements of the architecture. Now is the time to re-emphasize delivery of progress on climate, nature, human rights, and economic opportunity for all.
How BSR Can Help
BSR is working closely with member companies to:
- Understand what the regulatory requirements mean and how they relate to your business, strategy, and governance.
- Design customized due diligence and disclosure approaches that meet the letter and the spirit of the law that is aligned with your business and creates long-term value.
- Develop robust targets, KPIs, action plans, and governance structures that drive progress across the value chain.
- Deepen critical relationships with internal and external stakeholders, especially affected stakeholders.
- Apply foresight thinking to focus on long-term priorities, company strategy, and cross-company collaboration.
- Connect and collaborate with peers and practitioners to stay ahead in a world where "best practice" approaches are rapidly evolving. BSR's Future of Reporting Collaborative Initiative, Human Rights Working Group, and Sustainability Governance Roundtable provide members with collaborative ways to stay ahead.
Convenings with BSR Member Companies: BSR’s Decoding Regulations series helps businesses navigate and understand evolving sustainability regulations. Each session focuses on breaking down complex regulations, such as the EU CSDDD and CSRD, and providing practical guidance on compliance, reporting, and integrating sustainability into business strategies.
BSR’s Member Portal: The EU Omnibus Fact Sheet provides members with an overview of existing and emerging sustainability regulations, including CSRD, CSDDD, EU Taxonomy, and CBAM.
If you’d like further information on how BSR can help your business meet existing and emerging sustainability regulations, please contact us.
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