Following calls to reduce the regulatory burden imposed on businesses, the European Union is poised to reform a series of laws passed under the EU Green Deal that required businesses to address climate change. With a goal of reducing reporting requirements, the Omnibus Simplification Package will look at the EU Taxonomy, Corporate Sustainability Reporting Directive, and the Corporate Sustainability Due Diligence Directive. The initial Omnibus is set to be released on February 26, but a copy was leaked on February 22. In anticipation of a complicated policy making debate, I asled my expert circle on LinkedIn to provide their insight on what the future holds for the Taxonomy, CSRD, and CSDDD.
As part of the European Green Deal, a series of directives were passed by the EU to force businesses to address climate change and report carbon emissions. The goal is to comply with the climate initiates of the Paris Agreement, an international treaty signed in 2015 to prevent climate change. The agreement included a goal of reducing greenhouse gas emissions to net zero by 2050. The EU addressed this through three key legislative actions.
In 2020, the EU adopted the EU Taxonomy for Sustainable Activities. The Taxonomy created a classification system for business and investors to know what activities are considered green or climate friendly.
Then followed the Corporate Sustainability Reporting Directive in 2023. The CSRD created requirements for businesses to report GHG emissions and other environmental, social, and governance actions. For large companies, general reporting begins in 2025 for fiscal year 2024. Small and medium sized companies, non-EU based companies, and companies in high emission sectors will see reporting requirements being drafted and released over the next year.
The final piece, the Corporate Sustainability Due Diligence Directive, was adopted in May 2024. The CSDDD, or CS3D, created additional reporting requirements, as well as legal liability, for companies in relation to their supply chain. The intent is to not only regulate the direct actions of a company, but also assure their suppliers comply with climate and human rights goals. However, the CSDDD faced significant pushback during the final stages. Only finding approval after significant changes that reduced the scope.
Following an informal meeting of Council leadership in mid-November, Ursula von der Leyen, President of the European Commission, announced her intention to revamp sustainability regulations to reduce the burden on businesses. She stated the Council and Commission will have an omnibus bill that will take “a huge approach to reduce in one step, in all the different fields, what is agreed is too much today. We will look at the triangle Taxonomy, CSRD, CSDDD.”
On January 28, I provided my analysis of the future of the three regulations. In anticipation of the official release at the end of February, I extended an invitation to my circle of sustainability and climate change professionals on LinkedIn to provide their predictions for the Omnibus process and what the final, adopted changes could be. Here are their insights.
The Overall Direction of the Omnibus Simplification Package
“I think two issue areas are likely to be included: (1) The proposal will probably contain actions to reduce the reporting obligations for mid-cap companies, as this was mentioned in the Competitiveness Compass as a priority. (2) It is likely that the proposal will revise implementation timelines for some of the regulations, because the input by several member states pushed heavily in this direction. I expect that “proportionality” will be an argument that we are likely to hear a lot – e.g. proportionate timelines and proportionate obligations compared to the scale and scope of corporate activities.” – Andreas Rasche, Professor of Business in Society & Associate Dean, Copenhagen Business School (Denmark).
“The EU omnibus is not just about simplification, it’s a strategic improvement. Mid-cap companies will see reduced reporting burdens, but core disclosure obligations will remain firm. Also, given the push for artificial intelligence, businesses that are already leveraging AI-driven reporting will turn compliance into a competitive advantage.” – Champion Olatunji, Sustainability and Energy Lead, Liteon Corp (United States).
EU Taxonomy
“The final Taxonomy revisions will likely focus on refining criteria for transition activities, particularly in sectors like manufacturing and transport. We can expect clearer thresholds for what qualifies as ‘substantial contribution’ versus ‘significant harm,’ addressing industry concerns about feasibility. However, the core framework will remain largely unchanged to maintain regulatory stability for investors.” Catarina Milagre, Lawyer, specializing in the area of Energy and Natural Resources (Portugal).
“The current EU Taxonomy framework is over-complicated, over-engineered and not fit for purpose. It does not cover the full scope of economic activities that could be considered sustainable and current turnover alignment levels average 12%, leading to limited usability and low value for financial markets. The proposed simplifications regarding DNSH criteria, the use of estimations and the introduction of voluntary disclosures can help streamline both EU Taxonomy reporting itself, as well as the intended use cases for market participants.” Inna Amesheva, Director, Head of ESG Regulatory Solutions, ESG Book (Germany)
Corporate Sustainability Reporting Directive (CSRD)
“The figure of the small mid-cap company will be created. This will probably mean that many companies that were going to be obliged to report in 2026 (companies with more than 250 employees and/or net turnover of €40m and/or balance sheet total of €20m) will be excluded from the law and will become part of those companies that may or may not opt to report under the Voluntary Standards for SMEs that EFRAG has developed. In addition, Germany and France are asking for a two-year deferral of the law, which may also occur at the same time, causing a significant group of companies to start reporting not in 2026, but in 2027. 3. We are also likely to see a cut in the indicators to be reported by companies, the Commission is clear: reduction of the reporting burden by at least 25% for all companies and at least 35% for SMEs. If this happens, it will have to be explained very well, as there are already many European companies reporting on the basis of EFRAG” – Javier Molero Segovia, Director of Projects and Sustainability at United Nations Global Compact (Spain).
“I expect the European Commission to postpone sector-specific ESRS until the impact of the sector-agnostic standards is properly assessed. Early CSRD reports show a 25% increase in reporting volume, raising concerns that additional requirements could turn this into a bureaucratic exercise rather than a meaningful one. Companies operating across multiple sectors risk excessive reporting burdens, undermining efficiency and impact. A delay would allow for a proportionate approach, ensuring that sector-specific standards add value rather than complexity.” – Gabrielle Van Melkebeke, Senior Policy Manager: ESG, Sustainable Finance and Environment, The International Association of Oil & Gas Producers (IOGP) (Belgium).
“Given the challenges companies face in collecting sustainability-related information from partners within their value chains, I predict that the scope of the CSRD will be narrowed. This means that it will only impose mandatory sustainability reporting obligations on large companies and listed entities. At the same time, reporting obligations related to sustainability within the value chain will be streamlined. Companies will no longer be required to collect and disclose information related to their value chain, such as Scope 3 greenhouse gas emissions (ESRS E1) or labor conditions within the value chain (ESRS S2). Such simplification of the CSRD will help optimize the time and costs associated with sustainability reporting for EU corporates.” – Long Trương, Climate and Sustainability Lawyer, GREEN IN (Vietnam).
“Whatever the Commission includes in the proposal, it will hardly remain as is by the end of the legislative process (possible public consultation, trilogues, possible member states transpositions). There is a serious risk that the Commission fails to reign in the process (there are many precedents) and ultimately really deliver any meaningful simplification. A concerning early signal of this risk is what’s happening to the digital tagging requirement for CSRD statements. We started with “digital from the outset”, we slipped to “digital later”, and now there are talks of “who needs digital btw”. Xbrl tagging is not such a heavy lift, definitely not the most burdening requirement, and it ensures tremendous benefits in terms of data accessibility and usability. Instead, we’re getting fairy tales on how AI will automate any data extraction from the CSRD statements (we’ve been working on AI and disclosure analysis from 2014). The hard truth is that it’s hard to improve regulations that we’ve yet to see fully implemented yet.” – Donato Calace, Senior Vice President Market Leader, Partnerships and Innovation, Datamaran; Member EFRAG Expert Working Group on EU Sustainability Reporting Standards (England).
Corporate Sustainability Due Diligence Directive (CSDDD)
“I anticipate that the final CSDDD will include a narrower scope of liability for parent companies, balancing corporate accountability with legal certainty. We may see further alignment with OECD due diligence standards, ensuring feasibility for multinational corporations. Additionally, while director duties may remain in the directive, enforcement mechanisms could be softened, shifting from strict liability towards a more risk-based, proportional approach in supply chain due diligence.” – João Maria Botelho, Lawyer practicing in ESG & Energy, Climate Change Regulation, Pérez-Llorca (Portugal)
“There is more uncertainty here, but a lot of emphasis has been placed on taking into account especially the riskiest or most harmful activities of companies. The most likely scenario is that: 1. The deadline for implementation of the directive, which as of today would come into force in 2027, will increase. We will easily go to 2028 or more; 2. There will be fewer companies affected by the directive. Currently it will affect all companies with more than 1,000 employees and more than 450 million euros of turnover in 2029. This is unlikely to be maintained, as France has already requested that only companies with more than 5,000 employees be affected; 3. Finally, there are likely to be more ‘’cuts’’ in the value chain activities for which a due diligence process must be implemented, as the Commission emphasizes ‘’taking measures to prevent smaller companies in the supply chains of large companies from being subject to excessive ESG reporting requirements’”
– Javier Molero Segovia, Director of Projects and Sustainability at United Nations Global Compact (Spain).
“The final CSDDD could introduce a ‘safe harbor’ mechanism for companies that demonstrate best efforts in due diligence, shielding them from excessive liability. This would incentivize proactive compliance while addressing concerns about legal uncertainty. Such a move would mirror trends in competition law, where self-reporting and cooperation can mitigate penalties.” – Catarina Milagre, Lawyer, specializing in the area of Energy and Natural Resources (Portugal).
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