The EU's Sustainability 'Omnibus': major reform of the EU's sustainable finance system or tinkering at the margins?

In recent years, we have seen the introduction of new, landmark sustainability rules for certain businesses domiciled, or with significant operations in, the EU, including:

• the Corporate Sustainability Reporting Directive (CSRD), which requires in-scope businesses to make mandatory disclosures on a broad range of sustainability topics (for more information, see our blog here);
• the Corporate Sustainability Due Diligence Directive (CS3D), which requires in-scope businesses to conduct mandatory risk-based due diligence and take steps to manage adverse impacts on human rights and the environment (for more information, see our blogs here and here); and
• the Green Taxonomy Regulation (Taxonomy Regulation), which seeks to provide a "common language" for sustainable finance by establishing the criteria that economic activities must fulfil to qualify as "environmentally sustainable" (for more information, see our blog here).

In November 2024, Ursula von der Leyen announced her intention to create an 'omnibus' legislative instrument to simplify the administrative procedures and sustainability reporting requirements that are set out in the CS3D, CSRD and the Taxonomy Regulation (the Omnibus).

As we recently referenced in our blog on the initial draft of the proposed reporting standards for non-EU companies under CSRD, this announcement follows calls from Member States and industry members to lighten the administrative burden of complying with these three pieces of legislation and a number of Member States having not yet implemented CSRD into their national laws by July 2024 as required (see our blog post here) and the Commission initiating infringement proceedings against those Member States.

In this post, we look at what we know about the proposed Omnibus instrument so far and what comes next.

What is the Omnibus and why has it been proposed?

An omnibus instrument packages multiple bills into a single legislative package which may be passed in a single vote. It is important to note that the proposed sustainability Omnibus would not bring CSRD, CS3D and the Taxonomy Regulation into a single law. Rather, the resulting document will be a single piece of legislation which mandates changes to each of the CSRD, CS3D, and the Taxonomy Regulation – each of which would still be understood and implemented individually.

It is reported that the Omnibus will provide changes to each of the instruments that aim to streamline and simplify administrative procedures and reporting. As part of this process, CSRD, CS3D, and the Taxonomy Regulation will be subject to renewed political discussion.

The proposal for a simplification of the EU sustainability rules has arrived in the context of a renewed focus by the EU Commission on the competitiveness of EU businesses when compared to their global peers (for more detail, see our discussion of the Draghi report here) and to create an ecosystem for European investments in the green transition (for more detail see the Letta report here). The Commission is partly relying on deregulation as a means of achieving this goal. For example, in her State of the Union address in 2023, von der Leyen called for a 25% reduction in reporting requirements for small and medium businesses. In a similar vein, during a November 2024 speech, von der Leyen noted that while the “content of the [CSRD, CS3D, and Taxonomy Regulations] is good […] the way we get there, the questions we are asking, the data points we are collecting — thousands of them — is too much. Often redundant, often overlapping”.

Recent reporting suggests that the political debate over the nature and scope of the Omnibus has already begun. Some interested parties have suggested that it may be politically expedient (from a foreign policy perspective) to take this opportunity to amend the EU's sustainability legislation so that it weighs less heavily on non-EU companies. On the other hand, there has already been a robust response to the Omnibus' announcement from those seeking to maintain the scope and strength of the EU's sustainability obligations. For example, last week, an alliance of more than 90 NGOs, companies, and associations published a statement that expressed their deep concern that the Omnibus may facilitate the watering down of this legislation.

What might the Omnibus look like?                                         

Time will tell what changes the Omnibus will introduce. Some in the industry have suggested that the simplification package will represent a major reform of the EU's sustainable finance system, given the focus on increasing competitiveness.

It has been reported that possible changes may include:

• Amendments to the size thresholds for eligible companies.
• A reduction in the number of datapoints in the European Sustainability Reporting Standards (which underpin the CSRD).
• Fundamentally revising provisions that have been deemed unworkable by industry members.

Others have opined that the scope of the Omnibus is likely to be far more limited, noting von der Leyen's statement that the EU Commission "will maintain" the substantive aspects of the legislation and that the ambition of the Commission to launch the Omnibus in early 2025 (see also below) only leaves a very short period to considerably reform three very substantial pieces of legislation.

What's next?

The scope, ambition, and contents of the Commission's Omnibus instrument are currently unclear, and we will have to wait until 2025 for more concrete details to emerge. Currently, we expect to see a concrete proposal for the bill to be presented in early 2025, alongside the new Commission's work plan. An internal document leaked last week lists a "New Competitiveness Act" based on the Draghi report to be proposed in the first 100 days of the Commission, ending on 10 March 2025. According to market information, the full work programme is likely to be published in the second week of February 2025.

This timeline is already proving controversial, as the first CSRD reports are due in 2025 (reporting on the financial year 2024). At this stage, it is not expected that the publication of the "simplification package" will push back CSRD reporting deadlines for businesses or for member states to implement the directive (for more information, see our CSRD transposition tracker here).

While the announcement of the Omnibus has brought increased uncertainty for businesses, it is advisable to continue preparing - "business as usual" - for CSRD, CS3D and the Taxonomy Regulation, as we wait to gain a better understanding of what the Omnibus entails.

The authors would like to thank Sophie Pamplin for her contribution.