17.02.2025
Introduction:
Following an EU Heads of State and government meeting with the European Commission in Budapest on 8th November 2024, EU Commission President Ursula von der Leyen announced that it is the Commission’s intention to implement a far-reaching simplification Omnibus Package for sustainability reporting.
This proposal follows growing concerns in relation to the regulatory burden being placed on in-scope companies, especially small and medium-sized enterprises (SMEs), with various businesses expressing concerns that the current ESG regulations are overly costly and complex, particularly when it comes to the reporting obligations. As a result, the EU Commission intends to streamline these requirements, reduce redundancies, whilst making the reporting process more manageable.
What is it?:
The aim of the Omnibus Package is to attempt to simplify and streamline the existing corporate sustainability rules, reducing the current regulatory complexities and compliance burdens that in-scope companies are currently facing, while also addressing concerns over Europe’s economic competitiveness[1].
In essence, this undertaking will streamline the Corporate Sustainability Reporting Directive (CSRD)[2], the Corporate Sustainability Due Diligence Directive (CSDDD)[3] and the EU Taxonomy for sustainable activities. To recapitulate, the CSRD makes it mandatory for in-scope companies to comprehensively report on their sustainability impacts, risks, and opportunities, together with their associated management strategies. The CSDDD further requires in-scope companies to identify and address adverse human rights and environmental impacts in their operations and value chains. Lastly, the EU Taxonomy for sustainable activities defines economic activities considered to be environmentally sustainable and directs investments to such activities.
Updates:
On the 12th February 2025, the European Commission published its new Work Programme for 2025[4], providing welcome clarity and more detail on the proposed simplification endeavour, as well as an indication on the timeline of key planned proposals.
The streamlining process will be implemented through three planned omnibus packages, with the first and second omnibus proposals being due in Q1 2025 and the third due in Q2 2025. The primary aim of the three omnibus packages is to reduce certain reporting obligations for larger in-scope companies by at least 25% and at least 35% for all SMEs[5].
First Omnibus Package - Sustainability Simplification
The first omnibus package, which is expected to be published on the 26th February 2025, subject to no delays, will cover the CSRD, the CSDDD and the EU Taxonomy Regulation and address the simplification of sustainable finance reporting, sustainability due diligence and taxonomy. To achieve this, compliance timelines might be revised, together with better alignment of data obligations and financial metrics that are proportionate to the size of an in-scope company and its business activities. In practice, this proposal will also prevent smaller in-scope companies along the supply chains from being subjected to disproportionate and cumbersome reporting obligations.
Other possible amendments may include introducing phasing-in of some disclosure requirements for certain parts of the Regulations whilst making certain obligations optional to further reduce the compliance burden for companies[6].
Furthermore, the EU Commission has indicated that work has also commenced on simplifying the Carbon Border Adjustment Mechanism (CBAM)[7] which will benefit smaller importers, most notably for SMEs and authorities. This may also be included in the first omnibus package.
Second Omnibus Package - Investment Simplification
Also targeted for publication in Q1 2025, the second omnibus package will address investment simplification. By reducing and simplifying reporting obligations and boosting investment in green innovation, this proposal will facilitate the implementation of the InvestEU programme, as well as the European Fund for strategic investments[8].
Third Omnibus Package – Redefining Small-Mid Caps Companies
Planned to be published in Q2 2025, the third package will establish a new definition for small mid-cap firms that are larger than SMEs but smaller than large companies (between 250 and 1,500 employees, with sales not exceeding €1.5 billion or balance sheet totals not exceeding €2 billion). In turn, this will reduce reporting obligations for these firms, ensuring more proportionate requirements in line with the size of the in-scope company.
Way forward:
The raison d'être of the Omnibus Packages is to ultimately reduce the bureaucratic burden without changing the correct content of the legislation, aiming to strike a balance between simplifying regulations and ensuring transparency in ESG reporting.
Currently, all eyes are set for the 26th February, which will see the publication of the First Omnibus Package. While at present there is still a great deal of uncertainty as to what exactly this first proposal will do to the CSRD, the CSDDD and the EU Taxonomy, the outcome of these deliberations will have a significant impact on businesses across Europe. Accordingly, in-scope companies will need to stay updated and prepare for the coming changes that could impact their compliance strategies.
Author: Dr. Brandon Meli
The Omnibus Packages are a significant development which Dingli & Dingli Law Firm is closely monitoring. If you are an in-scope company looking out to understand how the Omnibus Packages will be affecting you or require advisory in respect of ESG reporting, feel free to reach out to Dr. Meli on brandon@dingli.com.mt
[1] https://www.erm.com/insights/the-eu-omnibus-regulation-preparing-for-changes-to-european-sustainability-disclosure-regulations/
[2] Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting
[3] Directive (EU) 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate sustainability due diligence and amending Directive (EU) 2019/1937 and Regulation (EU) 2023/2859 (Text with EEA relevance)
[4] https://ec.europa.eu/commission/presscorner/detail/en/ip_25_466
[5] https://www.arthurcox.com/insights/european-commission-work-programme-three-omnibus-proposals-plans-to-amend-the-securitisation-regulation-and-sfdr-fida-remains-on-the-list/
[6] https://www.erm.com/insights/the-eu-omnibus-regulation-preparing-for-changes-to-european-sustainability-disclosure-regulations/
[7] https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
[8] https://sustainablefutures.linklaters.com/post/102k002/eu-commissions-work-programme-sets-out-key-esg-sustainability-initiatives-for