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In the ever-evolving landscape of sustainability reporting, the European Union has made another significant move releasing its first proposed Omnibus package. This package is an important legislative initiative designed to simplify existing sustainability reporting requirements and the due diligence framework, reduce the number of companies in scope, and make it easier and more cost-effective for those companies that remain in scope to comply. In this blog, we’ll dive into the key aspects of this proposal and what it means for businesses across the EU and beyond.
Background on the Omnibus
At the start of this year, the European Commission (EC) released its Competitiveness Compass for the EU. The Competitiveness Compass was designed to set strategic priorities and guide the EU’s policy agenda over the next five years with a focus on boosting the region’s long-term competitiveness in the face of increasing global economic pressures.
Following the Competitiveness Compass, the EC released on February 26th its first Omnibus Simplification Package, proposing amendments to current requirements under the Corporate Sustainability Reporting Directive (CSRD), EU Taxonomy (EUT), and Corporate Sustainability Due Diligence Directive (CSDDD).
The package includes two main proposals:
- Proposal I (COM(2025) 801): A "stop-the-clock" directive that delays certain CSRD reporting requirements and postpones the transposition and application deadlines for the CSDDD.
- Proposal II (COM(2025) 812): Substantive amendments to the CSRD, CSDDD, and their links to the EUT, including updates to existing delegated acts and proposed changes to the Carbon Border Adjustment Mechanism (CBAM) Regulation.
These two proposals would create a phased approach to changes introduced by the EC.
- Allow an immediate delay to prevent companies from reporting under the current CSRD framework for FY2025 or FY2026, only to have those requirements changed later.
- Provide future amendments that would reshape the scope and obligations under CSRD and CSDDD before reporting begins for FY2027.
In this blog, we’ll discuss the key aspects of the proposals and potential implications it could have on companies currently focusing on their compliance with these regulations.
Keep in mind, these are just proposals which now move to the European Parliament and Council for review under the ordinary legislative process. Like any proposal, they are subject to change. Therefore, companies—especially those currently in scope of EU sustainability rules—should closely monitor developments throughout the legislative process.
Key changes to CSRD in the Omnibus proposals
The proposed changes to the CSRD are significant, with the goals of (i) easing the compliance burden for smaller companies and (ii) streamlining the process and disclosure requirements for those that remain within scope. A summary of key proposed changes are outlined below:
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Timing |
Under the current CSRD, reporting requirements are phased in across four waves based on entity type:
The “stop-the-clock” directive would delay reporting timelines under the CSRD by two years for entities in Wave 2 and Wave 3. If adopted, EU member states must transpose the proposal into national law by December 31, 2025. Meeting this deadline would ensure the revised timeline is in place before Wave 2 reporting would have otherwise commenced as certain companies may become exempted under other proposed revisions in Proposal II. The proposal does not postpone the application of the reporting requirements for Wave 1 or Wave 4 companies. |
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Scoping thresholds |
Proposal II significantly narrows the scope of entities required to report under the CSRD, aiming to simplify compliance and better align with CSDDD. If adopted, these changes would reduce the number of US companies subject to CSRD reporting requirements.
For Wave 4 companies:
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Value chains |
Proposal II introduces a "value chain cap" to reduce the reporting burden on smaller businesses within a company's value chain. Specifically under the cap, large entities reporting under the CSRD would be prohibited from requesting information from value chain partners with fewer than 1,000 employees, beyond what is included in a forthcoming voluntary SME reporting standard. This new cap aims to protect smaller entities that are outside the revised CSRD scope from being overburdened by data requests. This marks a shift from current CSRD requirements, which expect companies to report on their entire value chain—including upstream and downstream activities—with some grace periods for initial reporting years. The cap will help ease compliance for smaller businesses and simplify reporting for larger companies, ensuring that data collection efforts are proportionate and aligned with entities' regulatory obligations. |
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Materiality |
Despite prior speculation, the double materiality principle will remain a core requirement under the CSRD. The proposed revisions do not revert to financial materiality alone. While no changes are being proposed to materiality, there is an expectation future clarifications may emerge through updates to the European Sustainability Reporting Standards (ESRS). |
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ESRS |
The EC has proposed a significant revision to the ESRS aimed at streamlining requirements and reducing the reporting burden on companies. A revised delegated act is expected within six months of the proposal’s finalization and would substantially reduce the number of mandatory data points, prioritize quantitative over narrative disclosures, and clarify ambiguous provisions—particularly around the application of the double materiality principle. The goal is to simplify the structure and presentation of the ESRS, improve alignment with other EU legislation, and provide clearer guidance to help companies focus on material information without over-reporting. The proposal also confirms that the EC will no longer proceed with developing sector-specific ESRS or sustainability standards for listed SMEs, as those entities are being removed from CSRD scope under Proposal II. Instead, a voluntary standard—based on European Financial Reporting Advisory Group's (EFRAG) December 2024 guidance for non-listed SMEs—will be made available for companies outside the CSRD’s scope. These changes are expected to take effect in time for Wave 2 companies to begin reporting for financial year 2027, aligning with the updated CSRD timeline. |
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Assurance |
The proposal reaffirmed the EC’s commitment to a level of assurance over CSRD information while walking back planned moves toward stricter requirements. The requirement for limited assurance over CSRD sustainability reporting remains unchanged and is not delayed, aside from the general two-year “stop-the-clock” timeline shift for some entities. |
Key changes to other EU regulations in the Omnibus proposals
Beyond the CSRD, the Omnibus proposals also introduce important changes to the CSDDD and the EUT—both aimed at streamlining compliance and reducing burden, particularly for companies operating across complex value chains.
For the CSDDD, the proposal pushes the initial compliance date out by one year to July 26, 2028, while narrowing the due diligence scope to focus primarily on a company’s own operations, subsidiaries, and direct suppliers. In-depth assessments of indirect partners would only be required where there’s credible information suggesting potential harm. The obligation to terminate supplier relationships as a last resort is replaced with a suspension option, and monitoring cycles are extended to every five years. Stakeholder engagement requirements are reduced and more targeted, while the controversial EU-wide civil liability regime is dropped, giving member states discretion over enforcement.
For the EU Taxonomy, reporting obligations are delayed by two years and limited to entities with €450 million or more in EU turnover. Smaller CSRD reporters may opt in voluntarily if they wish to disclose Taxonomy-aligned activities. The proposal also introduces a 10% materiality threshold, streamlines the “Do No Significant Harm” criteria, and simplifies reporting templates—reducing data points by up to 70% for non-financial undertakings.
Implications for impacted companies
While the changes reduce the scope of entities required to report and ease some of the existing requirements, they offer both opportunities and challenges for businesses navigating an evolving regulatory environment.
On the opportunity side, the proposed two-year delay provides companies with more time to align with the new requirements, refine their sustainability practices, and enhance their data, systems, and internal controls. This extension also allows companies to observe benchmarks and best practices from early reporters, leading to improved reporting quality and regulatory readiness.
Entities that fall out of scope will likely benefit from reduced compliance costs, freeing up resources to invest in long-term sustainability strategies—such as clean technology or resilience initiatives. For those that continue to embrace sustainability reporting voluntarily, the shift presents an opportunity to strengthen stakeholder trust, enhance market reputation, and potentially access green financing. Companies taking a proactive approach may also position themselves as leaders in sustainability, gaining a competitive edge.
However, the changes also introduce risks. The narrowing of scope and reporting requirements could create a gap between what investors and stakeholders expect and what is legally mandated. Companies that scale back disclosures may face increased scrutiny or be seen as deprioritizing sustainability. The reduced comparability across sectors and countries—caused by fewer entities reporting and inconsistent frameworks—could also undermine the harmonization the CSRD aimed to achieve. Additionally, moving to a voluntary reporting regime for many entities may limit the consistency and assurance of reported information, raising concerns about greenwashing or incomplete data, especially across complex value chains.
Businesses that were initially in scope of the original CSRD should continue to monitor the progression of the Omnibus proposals. Despite the proposed reductions, many US companies will likely remain subject to CSRD reporting—particularly those with significant EU operations or ultimate parent entities that meet the enterprise-level thresholds. While scope criteria are proposed to be revised, enterprise-level reporting remains largely unchanged, including the absence of a 1,000-employee threshold at that level.
Therefore, companies should reassess their obligations under both the CSRD and other European regulations, especially when considering strategies like consolidated versus subsidiary-level reporting.
No-regrets moves for companies amid CSRD uncertainty
As the CSRD legislative landscape continues to evolve, companies should stay the course with strategic, future-proof actions that drive long-term value—regardless of whether they remain within CSRD scope. These “no-regrets” moves not only maintain momentum but also prepare businesses for broader regulatory and market demands.
1. Reassess scope, but stay the course
Evaluate your company's status under the proposed CSRD thresholds, including enterprise-level implications for non-EU parent companies. Even if de-scoped, consider continuing with sustainability efforts if they align with stakeholder expectations, voluntary frameworks, or overlapping global disclosure requirements like International Sustainability Standards Board (ISSB) or California’s climate rules.
2. Maximize the value of work already done
Many companies, particularly Wave 1 and Wave 2 reporters, have already invested significant resources in CSRD preparation. This work—especially around data, processes, and governance—remains valuable for other reporting frameworks and internal strategy. Don’t lose momentum; continue refining your systems, processes, and controls.
3. Double down on double materiality
Whether or not your company remains in scope, completing a Double Materiality Assessment (DMA) can be a no-regrets move. The insights gained from identifying your most material sustainability impacts, risks, and opportunities inform strategy, improve risk management, and boost resilience. For those who haven’t completed a DMA, consider starting with a focused financial materiality exercise.
4. Use the extra time to strengthen data and controls
The potential delay gives companies a window to enhance ESG data quality, fill gaps, and build more robust internal controls. Focus efforts on high-impact data—such as emissions and climate risk—that will remain relevant across reporting regimes.
5. Maintain focus on climate disclosures
Climate remains a cornerstone of both CSRD and other global frameworks. Assurance-grade climate data will be required across the board, so continue developing a credible climate transition plan and improving emissions reporting and scenario analysis.
6. Future-proof your strategy and governance
Build ESG expertise into your management team and integrate sustainability into overall business strategy. The principles of the CSRD, CSDDD, and EUT are valuable beyond compliance—they provide a strategic lens for long-term performance, stakeholder trust, and decarbonization initiatives.
7. Engage your value chain
Maintain strong engagement with suppliers and customers—especially those who may still fall under CSRD scope. Encourage voluntary disclosures and share expectations. Understanding upstream and downstream risks remains critical, regardless of your reporting obligations.
8. Align with voluntary frameworks
Adopting global sustainability standards such as ISSB, Task Force on Climate-Related Financial Disclosures (TCFD), or Global Reporting Initiative (GRI) can enhance transparency and comparability, especially as more jurisdictions, like California, implement these frameworks. Voluntary alignment signals commitment and keeps you positioned for future regulation.
9. Prepare for assurance
Limited assurance remains a requirement for in-scope entities, and assurance readiness is a smart investment for everyone. If your company is new to assurance, start small—target specific sustainability metrics. If you're already working with assurance providers, consider expanding the scope and depth.
10. Monitor local laws and regulatory developments
While CSRD amendments are still under review, many EU countries have already transposed the current version into national law. Until changes are formally adopted and transposed, existing obligations still apply. Stay informed, remain compliant, and be ready to adapt as the final rules come into focus.
Support Where and When You Need It
As the EU’s sustainability regulatory landscape continues to evolve, businesses must remain agile, informed, and strategic. The Omnibus proposal reflects a significant shift toward simplification, but it doesn't remove the need for thoughtful sustainability planning and reporting. Whether your company remains within scope or not, now is the time to reevaluate your strategy, capitalize on existing progress, and prepare for what’s next.
At Embark, we help companies navigate this uncertainty with confidence. From readiness assessments and materiality exercises to ESG data strategy, assurance prep, and reporting execution—we support organizations at every stage of their sustainability journey. Reach out to our team to explore how we can help you move forward or even get started!
