By Rachel Bukowitz
Disclaimer: This article is written as of March 2, 2025. Details of the CSRD, CSDDD, EU Taxonomy, and CBAM are subject to change as the Sustainability Omnibus proposal is sent to the European Parliament and Council for debate.
Sustainability reporting is ever-evolving, with new or updated regulations and standards continuing to emerge, making it more critical than ever for organizations to stay informed. Here are five key insights into the recently released Sustainability Omnibus, a proposal for streamlining EU sustainability reporting, to help your business navigate the changing landscape.
1: What is the Sustainability Omnibus?
The EU’s Competitiveness Compass set a vision for strengthening the EU’s competitiveness and making the EU’s economy more prosperous. To help the EU meet the goals of the Competitiveness Compass, while also meeting the objectives of the European Green Deal, the European Commission is recalibrating certain EU rules to enable a more cost-effective and growth friendly delivery of their policy objectives.
On February 26, 2025, the EU Commission published its Sustainability Omnibus package, a proposal which includes amendments to the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the Carbon Adjustment Mechanism (CBAM), and the EU Taxonomy.
While there are a number of proposed changes (see below), the Omnibus Proposal does not change the ‘double materiality perspective’, meaning that companies remaining in scope will have to report about how sustainability risks affect their business and about their own impact on people and the environment.
Some of the key proposed changes set forth in the Sustainability Omnibus include (1):
- Postponing implementation dates: Today’s package proposes postponing by two years the entry into application of the reporting requirements for large companies that have not yet started implementing the CSRD and for listed SMEs (so-called wave 2 and 3 companies) to give time to the co-legislators to agree to the Commission’s proposed substantive changes. The Omnibus also proposed postponing the transposition deadline and the first wave of application of the CSDDD by one year to 2028.
- Reducing the scope of reporting companies for CSRD: The reporting requirements would only apply to large undertakings with more than 1000 employees (i.e. undertakings that have more than 1000 employees and either a turnover above EUR 50 million or a balance sheet total above EUR 25 million) This means that the number of companies in scope will be reduced by about 80%.
- Implementing a ‘Value chain cap’: For companies which will not be in the scope of the CSRD anymore (up to 1,000 employees), the Commission will adopt by delegated act a voluntary reporting standard, based on the standard for SMEs (VSME) developed by EFRAG. That standard will act as a shield, by limiting the information companies or banks falling into the scope of the CSRD can request from companies in their value chains with fewer than 1,000 employees.
- Revising the European Sustainability Reporting Standards (“ESRS”): The Commission will revise the delegated act establishing the ESRS, with the aim of substantially reducing the number of data points, clarifying provisions deemed unclear, improving consistency with other pieces of legislation and reducing the number of data points.
- Deleting the sector-specific standards requirement: The proposal will delete the empowerment for the Commission to adopt sector-specific standards.
- Removing the reasonable assurance standard: The proposal removes the possibility for the Commission to move from a limited assurance requirement to a reasonable assurance requirement.
- Simplifying due diligence requirements: Simplifications of the CSDDD requirements include prolonging the intervals between two regular periodic assessments and updates from one year to 5 years, while clarifying that a company needs to assess the implementation of its due diligence measures and update them whenever there are reasonable grounds to believe that the measures are no longer adequate or effective; by streamlining the stakeholder engagement obligations; and by removing the obligation to terminate the business relationship as a last resort measure.
- Exempting small importers from CBAM obligations: Importers who import small quantities of CBAM goods (e.g., individuals and SMEs), representing very small quantities of embedded emissions entering the EU from third countries, are proposed to be exempted from CBAM reporting.
2: Which Businesses are Impacted by the Sustainability Omnibus?
Currently, the CSRD applies to all large companies (defined as companies above two out of the three following thresholds: €50 million net turnover, €25 million balance sheet total, 250 employees), as well as SMEs whose securities are listed on an EU regulated market.
The Sustainability Omnibus proposal will reduce the current scope of the CSRD to large companies with more than 1,000 employees (i.e. companies that have more than 1,000 employees and either a turnover above EUR 50 million or a balance sheet above EUR 25 million). Those companies will be required to report against the European Sustainability Reporting Standards (ESRS), while these standards will also be revised and simplified.
Companies outside the scope of CSRD (companies with up to 1,000 employees) may choose to report voluntarily on the basis of a simplified voluntary standard to be adopted by the Commission, based on the voluntary standards for SMEs (VSME) developed by EFRAG.
The proposed changes to CSDDD and CBAM reduce or eliminate reporting requirements for SMEs, including protecting SMEs from excessive sustainability information requests that they may receive when they are included in the value chains of larger companies or from financial institutions, such as banks, which fall in the scope of the CSRD and the CSDDD.
3: Why is the Sustainability Omnibus Important?
3R sees the Omnibus’ importance manifest across three main areas:
- Scope: While the proposal calls for the CSRD’s scope to be changed so that the number of companies in the required reporting scope will be reduced by about 80%, the simplified and scaled back reporting requirements to allow for broader, standardized, voluntary adoption across smaller or less mature organizations. Through the VSME standard and the forthcoming simplified, voluntary standard to be adopted by the Commission, SMEs will have the flexibility to engage in sustainability reporting, without burdensome requirements.
- Timeline: The Omnibus proposal gives in-scope companies more time to prepare for the CSRD and CSDDD. This enables companies to voluntarily report in the interim, positioning those companies to be well-prepared to deliver quality, compliant reports when it becomes a requirement.
- Materiality: The Omnibus retains the importance of conducting a double materiality assessment (DMA) to lay the foundation for companies’ sustainability strategies. DMAs are simply good for business and a tool companies can leverage to add value for all stakeholders.
4: What Happens Next?
The Omnibus Proposal is now sent to the European Parliament and the European Council, where negotiations could introduce further changes. Until the legislative process is complete, existing regulations — including the CSRD, CSDDD, CBAM, and the EU Taxonomy — remain in force. The Sustainability Omnibus does not suspend the requirements of these existing regulations.
5: How 3R Can Help
3R provides holistic support to help our clients navigate the complexities of sustainability reporting. We assist our clients in preparing for CSRD reporting by helping define entity boundaries, determine reporting scope, collect data, identify gaps against ESRS requirements, and conduct double materiality assessments. We also support our clients with drafting and designing their reports to be audit-ready.
Amid the ever-evolving regulatory landscape, our team stays versed in the latest updates. As with all the reporting projects we support our clients with, our goal is to help leverage sustainability reporting for more than just compliance, but moreover, as a strategic tool that can support long-term growth, resilience, and increased business value.
For companies who are in scope but now have two additional years to prepare – don’t stop. Do the important work that needs to be done for your Double Materiality Assessment and Value Chain Map. This can give you tremendous insight into potential gaps, weaknesses, and opportunities for your organizational reporting. If you don’t have the data available to report externally, then you’re not using it internally to drive business performance. If you have already completed this work and are no longer in scope per the new proposal, consider preparing to report to VSME so that you have the data you will need to report to your customers. There is tremendous value in the work that you have done and 3R can help you determine the best way to use that information to drive business value. Finally, if you are no longer in scope and haven’t started to prepare, there is still a chance that the Omnibus proposal is not adopted and you could be expected to report in Q1 2026, so let us help you determine the best path forward so that your time and resources are focused on work that is helpful for reporting to your customers and for use in your own business reviews, regardless of whether you need to report for CSRD.
(1) These changes are sourced from the Sustainability Omnibus and the European Commission’s Q&A on simplification omnibus I and II.