Factsheet EU Omnibus ESG Regulation

On 26 February 2025, the European Commission published its proposal for Omnibus legislation ("Omnibus proposal") containing several important changes to the Corporate Sustainability Reporting Directive ("CSRD"), the Corporate Sustainability Due Diligence Directive ("CSDDD") and the EU Taxonomy. In this Factsheet we discuss what we see as the most important changes envisaged by the Omnibus proposal. 

We note that the Omnibus is still a proposal and must be approved by the Council of the EU and the European Parliament. Therefore, it is possible that changes will still be made to the Omnibus proposal before it is approved. It remains unclear how long the adoption process will take, but it will likely be several months before there is more clarity.

Member States had until 5 July 2024 to implement the CSRD into national legislation. The Netherlands missed this deadline and is still in the process of finalising the implementation of the CSRD into Dutch law. The Dutch implementation legislation will need to be updated to reflect the amendments in the Omnibus (once it is finalised). This will likely cause further delays in the implementation process, and it is uncertain whether the Dutch government will postpone the implementation process until the Omnibus is adopted.

Changes to the CSRD

Scope of application

Large companies: the CSRD applies to all 'large EU companies' that meet at least two of the following three criteria, either individually or on a consolidated basis: a turnover exceeding EUR 50 million per year, a balance sheet total of more than EUR 25 million, and/or more than 250 employees (averaged over a year). The Omnibus proposal envisages that the CSRD will only apply to companies that have at least 1,000 employees on average and that meet one of the other two criteria. Therefore, the minimum of 1,000 employees must always be met.

Small and medium-sized enterprises listed in the EU: Due to the minimum requirement of 1,000 employees, small and medium-sized listed companies that do not meet this criterion are out of scope.

Non-EU companies: The CSRD also includes a (less extensive) reporting obligation for non-EU parent companies with a net turnover of at least EUR 150 million in the EU for each of the last two financial years, and one EU subsidiary meeting the "large company" criteria or a branch with a turnover exceeding EUR 40 million. The Omnibus proposal suggests raising the minimum net turnover from EUR 150 million to EUR 450 million. For the second criterion, the Omnibus proposal requires an EU subsidiary that meets the "large company" criteria under the old definition (i.e. not necessarily requiring a minimum of 1,000 employees) or a branch with a turnover exceeding EUR 50 million instead of EUR 40 million. The last change will allow a non-EU parent company to fall within the CSRD's scope, even if it does not have an EU subsidiary that meets the CSRD criteria.

Entry into force

EU-listed companies: already under the scope of the Non-financial Reporting Directive ("NFRD") had to report in line with the CSRD in 2025 for the financial year 2024. The Omnibus proposal postpones this reporting obligation by one year, meaning these companies will now have to report in 2026 for the financial year 2025.

Large companies: Under the CSRD, large companies must report for the first time in 2026 for the financial year 2025. A separate directive proposes postponing the obligation for large EU companies (with at least 1,000 employees) by two years, meaning they will have to report in 2028 for the financial year 2027.

Non-EU companies: This group must report for the first time in 2029 for the financial year 2028. The Omnibus proposal does not postpone these reporting obligations.

Simplification of ESRS

The European Sustainability Reporting Standards ("ESRS") outline the detailed reporting requirements for companies under the CSRD. The ESRS have been adopted as a delegated Act by the European Commission and have direct force of law in the EU. The Omnibus proposal states that within six months of its adoption, the Commission will revise the ESRS to significantly reduce the number of mandatory datapoints by removing those deemed least important for general sustainability reporting, prioritising quantitative datapoints over narrative text, and further distinguishing between mandatory and voluntary datapoints.

Clarification of 'double materiality'

The Omnibus proposal confirms that the double materiality principle will remain in place. However, in the revision of the ESRS, the Commission will provide clearer instructions on how to apply the materiality principle.

No sector-specific ESRS

The existing ESRS include 'sector-agnostic' reporting standards that apply to all companies. Under the CSRD, it was intended that 'sector-specific' reporting standards would also be adopted, containing additional requirements for different sectors (such as 'oil and gas'). However, the Omnibus proposal announces that no sector-specific standards will be adopted.

Voluntary standard for companies below threshold

For companies not within the CSRD's scope, the Omnibus proposal mentions that the Commission will adopt a voluntary reporting standard based on a draft devoloped for small and medium-sized companies.

The Omnibus proposal states that companies within the CSRD's scope should limit information requests to those specified in the voluntary standards for companies in their value chain that are not within the CSRD's scope. This does not apply to additional sustainability information commonly shared within the sector. Assurance providers must also consider this 'cap' on information requests in the value chain.

No reasonable assurance requirement in the future

Currently, the CSRD requires accountants to provide limited assurance on the sustainability report and mentions with the possibility of future reasonable assurance under certain conditions. The Omnibus proposal announces that reasonable assurance will not be required later.

Changes to the CSDDD

No change in scope of application

The Omnibus proposal does not change the scope of application of the CSDDD. It therefore still applies to 'EU companies' with more than 1,000 employees on average and a net worldwide turnover of more than EUR 450 million, and to 'non-EU companies' with a minimum turnover of EUR 450 million in the EU. For non-EU companies the number of employees is therefore irrelevant.

Delay in entry into force

In a separate proposed directive, the Commission aims to postpone the start of the application period for large companies by one year. For EU companies, the following timeline will apply for CSDDD compliance: 

• 26 July 2028: > 3,000 employees and > EUR 900 million turnover;
• 26 July 2029: > 1,000 employees and > EUR 450 million turnover.

For non-EU companies the same timeline applies, depending solely on the generated turnover.

Restriction due of diligence obligation in the value chain

The due diligence obligation will continue to apply to the company's own activities and those of its subsidiaries. The most significant change proposed by the Omnibus is the narrowing of due diligence requirements in the value chain to only the direct (tier-one) business partners of the company. There are two exceptions to this: if the company has information – for example, from credible media reports or reports by non-govermental organisations (NGOs) – suggesting adverse impacts at the operations of an indirect business partner, or if the indirect relationship is an artificial arrangement to circumvent the due diligence obligation. In these cases, the company may still need to take action to prevent or mitigate adverse impacts caused by indirect business partners.

No obligation to terminate business relationships

The Omnibus proposal removes the obligation to terminate relationships in questionas a last resort if the business relationship fails to prevent or mitigate adverse impacts. However, a company may still be required to suspend a business relationship under certain circumstances. 

Maximum harmonisation

The Omnibus proposal expands the maximum harmonisation regarding due diligence requirements. This means that Member States have less room to establish due diligence requirements that are stricter than or diverge from those included in the CSDDD.

Climate transition plans

Article 22 CSDDD currently states that companies must adopt a climate transition plan ("CTP") to ensure that their business model and strategy are compatible with the transition to a sustainable economy and with limiting global warming to 1.5°C, in line with the Paris Agreement. The Omnibus proposal removes the obligation to "put into effect" the CTP and replaces it with the requirement to include "implementing actions" in the CTP. Otherwise, the requirements for what must be included in the CTP remain the same.

Enforcement

The Omnibus proposal no longer requires fines to be linked to a company's worldwide turnover, and removes the minimum cap on fines, which was previously set at 5% of a company’s net worldwide turnover. Instead, the Commission will issue guidelines for fines. Otherwise, the possible sanctions and enforcement powers prescribed in the CSDDD remain unchanged.

Civil liability

The CSDDD includes provisions to harmonise civil liability for adverse impacts on human rights or the environment, and provide legal standing to trade unions or NGOs under certain circumstances. The Omnibus proposal removes these harmonisation attempts. However, the CSDDD confirms that Member States must provide access to justice and guarantee the right to an effective remedy.

Relation with the CSRD

The Omnibus proposal aims to ensure that companies subject to both the CSRD and the CSDDD are not required to report any information under the CSDDD that is additional to what is required under the CSRD.

Guidelines

The Omnibus proposal brings forward the deadline for the Commission to issue due diligence guidelines from 26 January 2027 to 26 July 2026. This adjustment would give companies in the initial group two years to familiarise themselves with and implement the practical advice and best practices detailed in the Commission's guidelines on due diligence before the CSDDD takes effect for them. The deadline for the Commission to provide guidance on the climate transition plan remains unchanged: 26 July 2027.

Taxonomy updates

Scope of application

The Omnibus proposal does not change the scope of the Taxonomy itself. However, if the proposal to reduce the scope of CSRD reporting is adopted, the number of companies subject to Taxonomy reporting will also be reduced. Furthermore, the Omnibus proposal introduces an opt-in regime for certain companies that remain subject to the Taxonomy. This entails amendment of the Accounting Directive. 

Opt-in regime

Taxonomy reporting will remain mandatory for large undertakings with over 1,000 employees and a net turnover exceeding EUR 450 million. However, under the opt-in regime, Taxonomy reporting will be voluntary for companies that have 1,000 employees but do not meet this turnover threshold. These undertakings will only need to disclose their turnover and capital expenditure KPIs, and may choose to disclose their operational expenditure KPI, if they claim their activities are aligned or partially aligned with the Taxonomy. Reporting is not required for undertakings below the EUR 450 million threshold that do not claim alignment with the Taxonomy. The opt-in approach will eliminate the cost of compliance with Taxonomy reporting rules for large undertakings with over 1,000 employees and a net turnover not exceeding EUR 450 million that do not claim their activities are environmentally sustainable under the Taxonomy.

Voluntary standards will be adopted

The Commission will adopt delegated Acts to establish sustainability reporting standards for voluntary use by undertakings that are out of scope. Until a Delegated Regulation for the marking up of sustainability reporting is adopted, undertakings are not required to markup their sustainability reporting. The proposed Taxonomy delegated Act is open for public consultation until 26 March 2025 and will then be adopted by the Commission.