Forum per la Finanza Sostenibile
Updates regarding the proposals of the Omnibus package and their impacts on the sustainable finance framework
The recent publication of the Omnibus Simplification Package has drawn the attention of businesses, financial market operators, and civil society. Given relevance of the Commission’s proposal, this month’s contribution aims to provide an overview of the proposed amendments to the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the Taxonomy.
Omnibus Simplification Package
On February 26, the European Commission published the Omnibus Package, which includes a series of measures aimed at enhancing European competitiveness and reducing administrative burdens for both financial and non-financial companies stemming from the provisions of the CSRD, the CSDDD, and the Taxonomy.
One of the key objectives of the package is streamlining sustainability reporting obligations. Among the most significant proposals:
- Alignment of the CSRD’s scope with the scope of the CSDDD, thereby exempting 80% of companies from their mandatory sustainability reporting (from over 50,000 companies to fewer than 7,000 across the EU). The directive would apply to large undertakings with more than 1,000 employees and either a turnover above EUR 50 million or a balance sheet above EUR 25 million;
- Postponement by two years of the application of the reporting requirements for the second wave and the third wave;
- Removal of the clause providing the transition from limited assurance to reasonable assurance on the sustainability reports;
- Simplification of the reporting standards (ESRS), including a reduction in the number of data points, prioritising quantitative data over narrative text, and the deletion of sector-specific reporting standards, attended in 2026.
Moreover, the Commission proposed some amendments to enhance the interoperability between the CSRD and the Taxonomy, in particular:
- Limitation of Taxonomy reporting obligations to larger companies (those with more than 1,000 employees and revenue exceeding EUR 450 million);
- Introduction of a financial materiality threshold for Taxonomy reporting and simplifying reporting templates by 70%;
- Introduction of the possibility of reporting activities partially aligned with the EU Taxonomy to increase transition financing;
- Exempting companies from assessing the eligibility and alignment to the Taxonomy for those economic activities that are not financially material to their business (e.g., those representing less than 10% of total revenue, CapEx, or total assets);
- Simplification of the "Do No Significant Harm" (DNSH) principle;
- For banks, excluding exposures to companies that will no longer fall within the future scope of the CSRD from the denominator of the Green Asset Ratio (GAR).
Regarding the CSDDD, the Omnibus package proposes:
- simplification of due diligence obligations by:
- Limiting the required due diligence to the company’s operations, those of its subsidiaries and those of its direct business partners (tier 1)
- Reducing the required frequency of periodic monitoring exercises (every 5 years instead of annually)
- Removing the obligation to terminate the business relationships in case of both actual and adverse impacts. Instead, companies would be required to suspend the business relationship while continuing to work with the supplier towards a solution, where possible, using any increased leverage resulting from the suspension
- Further limiting the trickle-down effect on SMEs and small midcap companies, by limiting the amount of information that may be requested by large companies as part of their value chain ;
- "Harmonisation" of due diligence obligations, prohibiting EU Member States from introducing human rights and environmental due diligence obligations diverging from those laid down in the directive to ensure that Member States do not go beyond the Directive;
- Postponement of the application of due diligence obligations for larger companies by one year (until July 26, 2028), while bringing forward the adoption of guidelines by one year (to July 2026);
- Elimination of the obligation to put into effect the climate transition plans, while maintaining the requirement to adopt a transition plan and outline implementing actions, planned and taken;
- Removing the specific EU-wide liability regime in the Directive, while preserving victims' rights to full compensation by national law. Pecuniary penalties would be based on Commission guidelines developed in collaboration with Member States rather than on net worldwide turnover of the company concerned.
The legislative proposals will now be submitted to the European Parliament and the Council for their evaluation and adoption.
