EU Omnibus: The impact on sustainability and your organization

On February 26, 2025, the European Commission unveiled its highly anticipated Omnibus proposal, introducing sweeping changes to key sustainability regulations, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy. 

The intended purpose is to reduce administrative burdens while boosting European competitiveness. The result? A dramatic weakening of sustainability reporting and due diligence obligations that could set European sustainability targets back by years while heavily undermining trust in EU institutions.

This article provides an overview of the key changes, as well as the legislative journey ahead of the Omnibus. We conclude with Coolset’s expert perspective on what this means for the future of corporate accountability, sustainability and regulatory stability in Europe.

Key takeaways from the Omnibus proposal

1. CSRD – Reporting thresholds raised, majority of companies off the hook

• Higher employee threshold: Mandatory reporting now applies only to companies with 1,000+ employees while the €50M turnover and €25M balance sheet thresholds remain. Over 80% of previously in-scope companies are now exempt.
• Sector-specific reporting scrapped: Originally planned for 2026, industry-specific standards will no longer be introduced.
• Two-year reporting delay: Wave 2 reporters (previously due in 2026) now have until 2028 to comply.
• Voluntary reporting option: A simplified standard (VSME) will be introduced for companies under 1,000 employees, offering boundaries to the extent of data requests from investors, financiers and larger companies.
• Revised ESRS standards: The Commission plans to reduce data points, clarify rules, and improve consistency with other regulations, lowering the ESRS reporting burden by as much as 70%.
• Weakened assurance requirements: Plans to upgrade from limited to reasonable assurance have been scrapped, easing auditing obligations.
• Alignment with CSDDD: The CSRD scope is now more closely aligned with due diligence regulations, mainly on the 1.000+ company size threshold. 

2. CSDDD – A weakened Due Diligence framework

• Implementation delayed: The transposition deadline moves to July 2027, with the first phase of due diligence requirements pushed to July 2028 for the largest companies.
• Reduced assessment frequency: Companies must update due diligence assessments every five years instead of annually, unless new risks emerge earlier.
• Weakened stakeholder engagement and enforcement: Companies are no longer required to terminate business relationships as a last resort.
• Restricted information requests from SMEs and small midcaps: Companies can only request sustainability data as specified in the CSRD voluntary reporting standards (VSME) unless essential for risk mapping.
• National control over civil liability: The EU removes harmonized liability conditions, leaving civil liability enforcement to national laws.
• Alignment with CSRD transition plans: Climate mitigation transition planning is now fully aligned with CSRD requirements.
• Stronger regulatory harmonization: The Omnibus introduces more standardized core due diligence rules across EU member states.
• Financial services exemption retained: The proposal removes the review clause for potentially including financial services in the directive.

3. EU Taxonomy – Only for the largest companies

• Voluntary reporting for mid-sized companies: Companies with less than 1,000 employees and turnover up to €450M can opt out of mandatory Taxonomy reporting, significantly reducing the number of obligated firms.
• Partial alignment disclosure: Companies making progress toward sustainability goals can voluntarily report on partial Taxonomy alignment, allowing recognition for ongoing efforts.
• Simplified reporting templates: Data points reduced by nearly 70%, easing the compliance burden.
• Materiality exemption: Companies can skip the EU Taxonomy assessment for activities that do not exceed 10% of turnover, capital expenditure, or total assets.
• Green Asset Ratio (GAR) adjustments: Banks can exclude non-CSRD-covered companies from the denominator of their GAR, simplifying financial sector reporting.
• Simplified “Do No Significant Harm” (DNSH) criteria: The Commission is consulting on alternative methods to streamline pollution prevention criteria across sectors.

What happens next? The legislative process in the EU

The Omnibus proposal is not yet law. It must go through the approval process in the European Parliament and the European Council before it can take effect. For now, it remains a proposal — nothing more, nothing less.

Here’s what happens next:

1. Proposal introduction

On February 26, 2025, the European Commission introduced the Omnibus Simplification Package. The proposal is then sent to the European Parliament and the European Council for initial review.

2. First reading in the European Parliament

• The European Parliament reviews the proposal and votes on whether to approve it.
• A majority vote (more than 50%) of Members of the European Parliament (MEPs) is needed for it to pass.
• Parliament may propose amendments, either reversing some changes or softening their impact. If amended, the proposal moves to the Council for further review.

3. European Council review and vote

• The European Council then considers the proposal.
• Approval requires a qualified majority: at least 15 out of 27 member states, representing at least 65% of the EU population.
• Given that 20 out of 27 EU countries have already incorporated the CSRD into national law, this step will likely incur some resistance.

4. Negotiations and second reading

• If the Parliament and the Council disagree, trilogue negotiations take place with the European Commission to reach a compromise.
• If both institutions approve the Omnibus without changes, it could be adopted within months.
• If negotiations fail, the resolution process could extend into 2027, keeping current laws in place.

5. Conciliation process

• If disagreements persist, a conciliation committee works to finalize a mutually acceptable version of the proposal.
• The agreed-upon text is then sent for a third and final vote.

6. Final approval (third reading)

• The final version is voted on by both Parliament and the Council.
• If both approve, the directive is officially adopted.
• If either institution rejects it, the legislative process ends, and the Omnibus does not become law.

7. Implementation across member states

• Once adopted, the directive is published and enters into EU law.
• Member states must integrate the new regulations into their national legal frameworks within a set period, typically two years.

If the Omnibus moves smoothly through the process, it could be in effect within months. However, if debates stall, final adoption may not happen until 2027.

The bigger picture: What this means for businesses

The Omnibus proposal is a drastic deregulation effort that undermines years of progress on corporate sustainability and due diligence. While proponents argue that reducing reporting obligations will alleviate burdens on businesses, the reality is stark:

• Companies that have already invested heavily in compliance are now at a competitive disadvantage. The EU hereby punishes early adopters.
• Trust in EU institutions will be at an all time low as the Omnibus sets a dangerous precedent: EU law can be reverted at any moment.  
• Investors with €6.6 trillion in assets under management have warned that going through with the Omnibus could undermine the integrity and ambition of the EU’s sustainable finance framework.
• Over 200 investors and financial actors argue that these regulations are essential for long-term economic growth and ensuring capital flows align with the European Green Deal.
• The EU’s leadership in sustainable finance and corporate accountability is severely weakened.

To put costs into perspective: SOMO estimates that the estimated annual cost of complying with CSDDD is just 0.13% of the average shareholder payout in 2023—hardly an unbearable burden.

Renewed focus on the VSME

With the significant reduction in CSRD scope, the Voluntary Sustainability Reporting Standard for SMEs (VSME) is set to become a key framework for companies that are no longer required to report under CSRD but still need to disclose sustainability information to their corporate clients, banks, and investors.

The VSME provides a structured yet simplified framework aligned with the European Sustainability Reporting Standards (ESRS), allowing mid-sized and smaller companies to demonstrate sustainability efforts without excessive compliance burdens. It enables companies to maintain transparency and credibility in their supply chain relationships, helping them secure business with larger enterprises that remain subject to CSRD reporting obligations.

Coolset’s take: Turning uncertainty into opportunity

At Coolset, we see this move as a major setback for corporate accountability and sustainability reporting. This proposal rewards late adopters while punishing companies that took proactive steps to comply with the original regulations. Worse still, it introduces months (if not years) of regulatory uncertainty, leaving businesses in limbo. 

That said, we’re committed to showing up as a long-term partner to our customers, supporting them through this transition as they refine their sustainability strategies.

Beyond our presence and support, Coolset is strongly positioned to help companies navigate this evolving landscape:

• Our products are built for adaptability, ensuring clients remain compliant no matter what regulatory shifts occur.
• We have strategically focused on serving mid-market enterprises — companies that must balance resource allocation, sustainability, and a long-term perspective daily. We’re proud to work with businesses that view corporate sustainability as more than just a regulatory exercise and recognize its strategic value: whether through the ripple effects of mandatory reporting or their voluntary efforts.
• This period of regulatory uncertainty underscores the need for digital solutions that can dynamically adapt to evolving realities. Investing in a robust sustainability management infrastructure is already delivering clear returns.

As for what to do today: corporate sustainability is a long-term commitment to building a durable and healthy business. Staying on course is what sets future winners apart, and at Coolset, we’re working closely with our customers and partners to develop strategies that align with the new regulatory environment. We look forward to supporting the future leaders of our sustainable economy.

Action

If your company is affected by these changes and you’re unsure about your next steps, reach out to us. Coolset’s compliance experts are here to help you stay ahead of the curve. Let’s talk.

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