The EU Simplification Omnibus initiative: a new plan for EU's sustainable prosperity and competitiveness

February 28, 2025

The European Commission has adopted new proposals that will simplify EU rules for citizens and business. In the recent Competitiveness Compass, the Commission set out its vision to make the EU’s economy more prosperous and competitive.

What is the EU simplification Omnibus?

As a response to concerns raised by several stakeholders regarding the complexity of European sustainability legislations, the President of the European Commission Ursula von der Leyen indicated that the EU Commission was considering consolidating the CSRD, CSDDD and the EU Taxonomy into one omnibus regulation. Discussions about reducing the reporting burden on companies was sparked by a report by the former Italian Prime Minister Mario Draghi discussing the Future of European Competitiveness, which pointed to regulatory barriers as a major cause of the EU's economic stagnation. In January 2025, Germany and France voiced concerns and called for a simplification and postponing of the CSRD. The first Omnibus proposals from the European Commission were published on February 26, 2025.

Which legislations are affected by the Omnibus proposal?

Corporate Sustainability Reporting Directive (CSRD): The CSRD outlines sustainability information that companies are required to report. The purpose is to ensure that investors and other stakeholders have access to the information they need to assess the impact of companies on people and the environment, and for investors to assess financial risks and opportunities arising from climate change and other sustainability issues.

Corporate Sustainability Due Diligence Directive (CSDDD): The aim of the CSDDD is to foster sustainable and responsible corporate behaviour in companies’ operations and across their global value chains. The new rules will ensure that companies identify and address potential and actual adverse human rights and environmental impacts in their own operations, subsidiaries and, where relevant their value chains.

EU Taxonomy: The EU Taxonomy establishes a classification system for companies to identify which economic activities are considered sustainable.

Carbon Border Adjustment Mechanism (CBAM): The CBAM puts a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries. 

How does the Omnibus proposal affect your organization?

The Omnibus proposal, released on 26th of February 2025, brings several changes to existing sustainability directives. Here is a (non-exhaustive) list of main proposed changes and how it can impact your business:

For CSRD and EU Taxonomy, changes include:

Aligning sustainability reporting scope with the CSDDD, removing around 80% of companies from the scope of 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).
The CSRD and EU Taxonomy reporting requirements are postponed for two years (until 2028) for companies currently in the scope of CSRD and which are required to report as of 2026 or 2027.
Limiting the EU Taxonomy reporting obligations to the largest companies (corresponding to the scope of the CSDDD), while keeping the possibility to report voluntarily for the other large companies within the future scope of the CSRD.
Introducing the option of reporting on activities that are partially aligned with the EU Taxonomy, fostering a gradual environmental transition of activities over time.
Introducing a financial materiality threshold for the Taxonomy reporting and reduce the reporting templates by around 70%.
In the EU Taxonomy, simplifications to the most complex “Do no Significant harm” (DNSH) criteria for pollution prevention and control related to the use and presence of chemicals to all economic sectors.
Simplifications of Taxonomy-based KPIs for banks. Banks will be able to exclude from the denominator of the Green Asset Ratio (GAR) exposures that relate to undertakings which are outside the future scope of the CSRD (i.e., companies with less than 1000 employees and €50m turnover).
Ensure that sustainability reporting requirements on large companies do not burden smaller companies in their value chains by adoption of a voluntary reporting standard (VSME).

For CSDDD, the main changes include:

Simplify sustainability due diligence requirements so that companies in scope avoid unnecessary complexities and costs, e.g., by focusing systematic due diligence requirements on direct business partners; and by reducing the frequency of periodic assessments and monitoring of their partners from annual to 5 years, with ad hoc assessments where necessary.
Reduce burdens and trickle-down effects for SMEs and SMCs by limiting the amount of information that may be requested as part of the value chain mapping by large companies.
Further increase the harmonisation of due diligence requirements to ensure a level playing field across the EU.
Remove the EU civil liability conditions while preserving victims' right to full compensation for damage caused by non-compliance, and protecting companies against over-compensation, under the civil liability regimes of Member States; and
Give companies more time to prepare to comply with the new requirements by postponing the application of the sustainability due diligence requirements for the largest companies by one year (to 26 July 2028), while advancing the adoption of the guidelines by one year (to July 2026).

For CBAM:

Exempt small importers from CBAM obligations, mostly SMEs and individuals, by introducing a new CBAM cumulative annual threshold of 50 tonnes net mass per importer, thus eliminating CBAM obligations for approximately 182,000 or 90% of importers, mostly SMEs, while still covering over 99% emissions in scope.
Simplify the rules for companies that remain in CBAM scope: on authorisation of CBAM declarants, as well as the rules related to CBAM obligations, including the calculation of embedded emissions and reporting requirements.
Make CBAM more effective in the long term, by strengthening the rules to avoid circumvention and abuse.
This simplification precedes a future extension of CBAM to other ETS sectors, downstream goods, followed by new legislative proposal on the scope extension of CBAM in early 2026.

Finally, also on February 26, 2025, the European Commission published its communication on a Clean Industrial Deal. The Clean Industrial Plan outlines concrete actions to turn decarbonisation into a driver of growth for European industries. This includes lowering energy prices, creating quality jobs and the right conditions for companies to thrive. From a direct tax perspective, key takeaways include:

Intention to issue recommendations for EU Member States to adopt tax incentives to support the Clean Industrial Deal, including shorter depreciation periods for certain technology assets and the use of tax credits for businesses in strategic sectors for the clean transition.
Proposal for a new Clean Industry State Aid Framework to be adopted by June 2025, which would build on the current Temporary Crisis and Transition Framework and outline, amongst others, conditions for tax incentives to be considered compliant from an EU State aid perspective when introduced as selective measures.

This is a non-exhaustive list, for detailed information we refer to the EU Omnibus details. Omnibus I is focusing on simplifying EU (reporting) rules and boosting competitiveness. Omnibus II is related to InvestEU (drives investment across Europe and empowering businesses to grow, innovate, and build a sustainable future. The proposals will now be submitted to the European Parliament and the Council for their consideration and adoption.

How can we support you?

Do you want to know what impact the above changes could have for your business? We can provide tailored solutions to identify and close your gaps, help determine ambition levels and provide guidance for your future sustainability roadmaps.