Omnibus proposal: the European Commission adopts the first package of simplification measures for EU rules

As announced on January 29, when presenting the Competitiveness Compass , which mentioned the Omnibus proposal, the European Commission has unveiled its first simplification package focusing on the main sustainability rules approved in recent years.

Adopted by the Commission on February 26, the initiative includes two proposals for a directive amending the CSRD and the CSDDD and delaying entry into application of the reporting requirements under the CSRD as well as the deadline for transposing and applying the CSDDD, a draft delegated act amending the delegated acts on the Taxonomy and two proposals for a regulation amending the Regulation on the Carbon Border Adjustment Mechanism Regulation and the InvestEu Regulation.

The key changes proposed by the European Commission focus on simplifying requirements, removing companies from the scope of obligations and postponing entry into application deadlines, as follows:

Corporate sustainability reporting directive (CSRD)

The European Commission proposes the following amendments regarding this directive:

• Scope of application: The proposal is to raise the threshold for in-scope companies to more than 1,000 employees and a turnover higher than €50 million or a balance sheet above €25 million.
• This is undoubtedly a major change since the directive currently in force includes large companies that exceed two of the following three thresholds: a €50 million turnover, a €25 million balance sheet and 250 employees, as well as listed SMEs.
• Companies falling outside its scope (those with less than 1,000 employees) being able to choose to report voluntarily, under the voluntary standards for SME’s drawn up by EFRAG.
• Entry into application of reporting requirements: The Commission proposes to postpone by two years the entry into application of reporting requirements for large companies that have not yet started reporting.
• Revision of the European sustainability reporting standards (ESRS): the Commission will revise the delegated act setting out the ESRS with the aim to substantially reduce the number of data points, clarify certain provisions and improve consistency with other pieces of EU legislation.
• Sector-specific standards: The proposal is to remove the sector-specific standards, which were scheduled for approval in the near future.
• Assurance obligation: removing the option of moving to a requirement for reasonable assurance and leaving only limited assurance for sustainability information.

Corporate sustainability due diligence directive (CSDDD)

The first proposal in relation to this directive is to give companies more time to prepare for the new requirements. This is sought to be achieved by postponing the deadline for member states to transpose the directive by a year (until July 26, 2027) and delaying for twelve months (to July 26, 2028) the entry into application of sustainability due diligence requirements for larger companies, meaning those with more than 3,000 employees on average and a worldwide turnover above €900 million. It also brings forward by a year (to July 2026) the date by which the European Commission must adopt the guidelines with guidance and good practices on how to perform due diligence.

Other changes proposed by the European Commission are the following:

• An amendment to the article on harmonization of legislation in the member states, by increasing the provisions in the directive that they will have to respect in the transposition process. It nevertheless keeps the option for member states to lay down additional requirements to achieve another level of protection for human rights, employment and social rights, or for environmental and climate protection.
• Various requirements for the due diligence process on sustainability are amended. For example (subject to the specified exceptions), the analysis of adverse impacts must focus on direct business partners not on the whole chain of activities.
• Amendments are also made to the measures of last resort that companies must adopt to prevent and remove adverse impacts, and it is even stated that as long as there is a reasonable expectation that the prevention or corrective action plan will succeed, the mere fact of continuing to engage with the business partner must not trigger the company’s liability.
• It is proposed to limit the information that in scope companies may request from their SME and small and mid-cap business partners (companies with up to 500 employees). In principle, this will have to be reduced to the information specified in the voluntary ESRS approved under the CSRD.
• Engagement with stakeholders: a definition of stakeholders is provided, which are confined to the company’s employees, the employees of its subsidiaries and of its business partners, as well as their trade unions and workers’ representatives, and individuals or communities whose rights or interests are or could be directly affected by the products, services and operations of the company, its subsidiaries and its business partners, and also their legitimate representatives. It further restricts the stages of the due diligence process in which companies have to consult stakeholders.
• Regular assessments: the frequency of regular assessments is reduced to once every 5 years, or whenever there are reasonable grounds to believe that the measures are no longer adequate or effective or that new risks of the occurrence of those adverse impacts may arise.
• Civil liability: uniform rules on civil liability among the member states as provided in the directive currently in force are removed, and the civil liability regime refers to the provisions in national laws which must ensure that victims have a right to full compensation in the event of a breach of the obligations under the directive.
• Transition plan for climate change mitigation: the wording is changed to adapt it to the wording in the CSRD, but the obligation to adopt that plan is retained.

European taxonomy

In relation to the Taxonomy, the Commission proposes an amendment of Commission Delegated Regulation (EU) 2021/2178 as regards the simplification of the content and presentation of information to be disclosed concerning environmentally sustainable activities and Commission Delegated Regulations (EU) 2021/2139 and (EU) 2023/2486 as regards simplification of certain technical screening criteria for determining whether economic activities cause no significant harm to environmental objectives.

The most notable components of the amendment are seeking to make the Taxonomy mandatory only for large companies exceeding 1,000 employees on average. Furthermore, companies covering a few of the criteria will be able to report their alignment voluntarily.

Companies are also exempted from assessing the eligibility and alignment of their economic activities that are not financially material (that is, they are below 10% of their turnover). This act opens the possibility of excluding from the denominator of the green asset ratio (GAR) exposures related to companies outside the scope of the future CSRD and asks for opinions on alternatives in the simplification of the do-no-significant-harm (DNSH) principle.

Furthermore, options are introduced for companies to report on activities partially aligned with the taxonomy, and it is proposed to unify reporting templates and remove summary reporting on non-eligible information, which, according to the European Commission, will reduce reportable data points by 66%. Lastly, this new amendment includes mandatory reporting requirements on revenues and CapEx and provisions allowing companies not to report OpEx.

Carbon Border Adjustment Mechanism (CBAM)

The first Omnibus simplification package is aimed at simplifying and strengthening the CBAM, by proposing that importers of small quantities of goods, which represent very small quantities of embedded emissions imported into the EU and in most cases relate to SMEs and individuals, should be exempt from CBAM obligations.

The proposal contains a set of simplifications for importers of CBAM goods above the mass-based threshold (imports higher than 50 tonnes a year), to facilitate compliance with reporting requirements. The following elements in particular are simplified and streamlined:

• The authorization procedure for the national competent authorities and the Commission. Consultation among national authorities for the authorization of declarants will cease to be mandatory.
• Data collection processes from third country producers to authorized CBAM declarants.
• Calculation of embedded emissions for certain types of goods. Adjustments are made to how default values are determined, by giving priority to data on the 10 exporting countries with the highest emission intensities where no reliable specific data on the country is available.
• Emission verification rules.
• Calculation of the authorized CBAM declarants’ financial liability during the year of imports into the EU.
• Claims by authorized CBAM declarants for carbon prices paid in third countries where goods are produced.
• Removal of non-calcined kaolinic clays from the scope of the CBAM, because they are not carbon-intensive products.

It is scheduled  that in the second half of 2025, the Commission will present a comprehensive CBAM review report, which will pave the way for a potential extension of the CBAM scope.

Legislative procedure

The proposals presented by the European Commission now have to follow the legislative procedure. The proposals for directives amending the CSRD, the CSDDD and the CBAM will only come into force after the European Parliament and the Council have reached an agreement and they are published in the Official Journal of the European Union.

The draft delegated act amending the current delegated acts derived from the Taxonomy Regulation must undergo a four-week consultation period, which has already started, and will then be examined by the European Parliament and the Council.