The Omnibus Package: what does the future of sustainability reporting look like?

The financial industry has been animated about the latest developments in sustainability reporting. On 26 February 2025, the EU Commission published the first Omnibus Package (the “Simplification Package” or “the Package”) which aims to simplify the sustainability reporting framework by reducing the existing requirements. Market players have been sharing their feedback on this evolution, with many welcoming it as a positive turning point, some cautious about implementation and pausing their efforts, others considering that sustainability goes beyond regulation and continuing their efforts. Despite this, most can agree that the Package brings with it significant simplifications, even if no regulatory requirements are not outright removed.

Practically, what does the Simplification Package propose? And what could we expect the sustainability reporting landscape to look like in the weeks and years to come?

What files are included in the Package?

• Proposal for a Directive amending Directives 2006/43/EC, 2013/34/EU, (EU) 2022/2464 and (EU) 2024/1760 as regards certain corporate sustainability reporting and due diligence requirements 
• Proposal for a Directive amending Directives (EU) 2022/2464 and (EU) 2024/1760 as regards the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements 
• Taxonomy Delegated Acts – amendments to make reporting simpler and more cost-effective for companies 
• Proposal for a Regulation amending Regulation (EU) 2023/956 as regards simplifying and strengthening the carbon border adjustment mechanism

What is expected to change in CSRD?

Only companies with more than 1,000 employees and with either a turnover above EUR 50 million or a balance sheet above EUR 25 million will fall under the scope of the CSRD. Moreover, the existing sustainability reporting standards will be simplified and the sector-specific standards requirement (which had been postponed before) will be removed.

The Proposal also creates a derogation by making the reporting of EU Taxonomy voluntary and by introducing the option of reporting on partial Taxonomy-alignment for companies with more than 1,000 employees and a turnover below EUR 450 million.

Regarding assurance, it will be no longer possible for the Commission to propose a reasonable assurance requirement.

The double materiality concept¹ will be maintained, and the value chain information will be simplified. The EU Commission is expected to adopt delegated acts on a voluntary reporting standard, which will aim to limit the information that companies can request from the entities in their value chain with less than 1,000 employees. Finally, an additional proposal for a directive – which forms part of the same package – proposes the postponement of the entry into application of the reporting requirements by two years for large companies that have not yet started implementing the CSRD, and for listed SMEs. The Commission recommends co-legislators to reach rapid agreement on the proposed postponement, in particular to provide the necessary legal clarity for undertakings in the second wave that are currently required to report for the first time in 2026 for financial year 2025.

It is worth noting that the Proposal is still going through the entire legislative process, which means that its content is subject to change. Regarding the current application of CSRD for the first wave companies (PIE 500+ on FY24), it is still unclear.

What is expected to change in CS3D?

Full due diligence with respect to the value chain beyond direct business partners will only be required in cases where the company has plausible information suggesting that adverse impacts have arisen or may arise there. Moreover, the frequency of the regular periodic assessments and updates part of the sustainability due diligence requirements will be increased from annually to every five years.

The harmonized EU conditions for civil liability have been removed and these provisions will now be defined by Member States under their national laws.

A key point for the financial industry is that the review clause on inclusion of financial services in the scope of CS3D has been removed.

Lastly, the application date has also been postponed by one year (i.e., transposition deadline will be 26 July 2027 and the first phase of application will begin on 26 July 2028.

What is expected to change in the EU Taxonomy?

The Proposal amends the Taxonomy Delegated Acts² by simplifying their reporting templates, reducing about 70% of data points. In addition, it exempts companies from assessing Taxonomy-eligibility and alignment of their economic activities that are not financially material³ for their business. The Proposal also introduces other changes, such as:

• The option of reporting partial disclosure to foster transition finance
• The simplification of the Green Asset Ratio (GAR) used by banks
• The reduction of the scope for mandatory reporting on operational expenditure, and
• The simplification of certain ‘Do no significant harm' (DNSH) criteria

What happens now?

Timeline

• From a timeline perspective, the official legislative process for the Omnibus Package has kicked off – next is for the European Parliament and Council to complete their review
• The main Proposal for a directive which brings substantial changes to CSRD and CS3D will still go through the entire legislative process – amendments to the text can therefore be expected
• Transposition and application of the Proposal for a directive postponing the dates could be expected towards the end of 2025
• Once published in the Official Journal, Member States are expected to have 12 months to transpose and apply the provision.

Note: The draft Delegated Act under the Taxonomy Regulation was open for public feedback until 26 March 2025 and is expected to be published in the Official Journal by the end of this year and to apply as from 1 January 2026.

Sustainability remains a crucial component of corporate transparency

The Omnibus Package proposes much-needed simplifications. However, this is not a signal for companies to pause their compliance efforts. As the move to reasonable assurance has been pushed, some companies may decide to wait for further clarifications before taking action. Yet, it is important to remember that the core principles of ESRS and sustainability reporting have not been called into question. Companies that prepare proactively, for example by reporting on EFRAG’s simple and standardized Voluntary reporting standard for SMEs (VSME), will be better positioned for future regulatory developments and market expectations. Therefore, the recommendation is for companies to use this moment as an opportunity to revisit reporting obligations, and take steps to understand the new requirements and possible timeframes. We already see the majority of EU undertakings proceed with their CSRD-related reports, using the Package as a foundation to structure their disclosures.

By and large, the Package appears well-received, especially for non-EU firms with business in Europe. For them, the challenges have mostly related to data availability, more so than the regulation itself. In fact, the Taxonomy is positively viewed as a tool for transparency and risk management, and has triggered necessary conversations around incorporating sustainability risks into corporate strategies.

So, where should companies focus their attention now? With most in agreement that non-financial disclosure regulations are important – especially for investors in their decision-making – now is the time for companies to consider how they can strengthen their internal sustainability frameworks. Sustainability reporting is not going anywhere, and it is essential that all impacted take the steps to digest the latest developments and continue on their journey to a sustainable future.

How EY can help

EY teams bring over two decades of expertise in sustainability and ESG services, leveraging deep technical skills to help businesses harness sustainability for value creation. Our approach, termed “value-led sustainability,” is integral to shaping a better future for all stakeholders.

Our ESG Regulatory Compliance Services are designed to help you stay ahead of evolving ESG regulations. We work proactively to ensure your business not only meets the latest compliance deadlines but also anticipates future requirements. By building a robust, adaptable system, we position you to confidently manage regulatory challenges while strengthening your ESG framework.

Our Sustainable Finance Advisory services empower you to turn ESG requirements into growth opportunities. We guide you through the complexities of sustainable finance, helping you develop innovative products, tap into new markets, and meet emerging client demands. With our support, you can seamlessly integrate ESG considerations into your business strategy, positioning yourself as a leader in sustainable finance.