Early in 2025, news broke that the EU was planning to alter some of its sustainability regulations.
The CSRD and the CSDDD – two directives which have been central to sustainability reporting in the bloc in recent years – were slated for simplification.
This series of changes (referred to as the Omnibus package), were officially announced at the end of February 2025.
Announcing the changes, Ursula von der Leyen, President of the European Commission, said: “Simplification promised, simplification delivered!”
However, not all businesses were happy about the changes.
Back in January 2025, long before the package came into effect, a group of businesses signed an open letter campaigning against the changes.
The Omnibus, they argued, was set to water down the standards of reporting across Europe, potentially derailing the continent’s pursuit of sustainability.
Now, with the changes enacted, companies find themselves having to adapt to new regulations slightly unsure of how to proceed with reporting.
The changes, it seems, have not yet made reporting intuitive enough.
In response, EY’s Alan Holm, Partner in Climate Change & Sustainability at the firm, delivered a webinar detailing how companies should navigate the new legislation.
The most notable change the EU’s Omnibus brings about is the proposed two-year postponement for Wave 2 and Wave 3 reporters, allowing time to adjust to new thresholds.
The updated criteria now apply only to large companies with more than 1,000 employees, €50m (US$54m) turnover or a €25m (US$27m) balance sheet.
This significantly reduces the number of affected companies from approximately 50,000 to fewer than 7,000.
In his analysis, Alan emphasises the importance of staying informed, particularly regarding legislative amendments that could further alter timelines and requirements.
“The Omnibus Package demonstrates that the European Commission’s intent is serious and urgent, but the legislative process may result in further amendments and delays,” he says.
The package also raises the reporting threshold for third-country undertakings from €150m (US$163) to €450m (US$490m) in EU turnover.
Furthermore, value chain reporting requirements have been eased for SMEs, and plans for sector-specific reporting standards have been scrapped.
The removal of the mandate to shift from limited to reasonable assurance on sustainability data represents another key revision, reducing the compliance burden for businesses.
While the EU remains committed to sustainability, the Omnibus package acknowledges the complexities of implementation.
The ‘stop-the-clock’ directive for Wave 2 reporters exemplifies the need for regulatory flexibility.
Alan explains that businesses should “closely monitor progress of the Omnibus proposals, especially the ‘stop-the-clock’ directive if in Wave 2.”
The delay in mandatory due diligence reporting until July 2028 reflects the challenges of enforcement across supply chains.
The revised directive narrows due diligence obligations to direct suppliers, except where there is credible evidence of indirect partner misconduct.
Supplier monitoring has also been adjusted, moving from annual checks to a once-in-five-years requirement.
The Omnibus package presents an opportunity for businesses to refine their approach to sustainability beyond compliance.
Alan advised companies to revisit their scoping based on new thresholds, assess alignment with the International Sustainability Standards Board (ISSB) and understand the Voluntary SME (VSME) standard.
He suggests that companies should “use DMA to simplify, reassess phasing on reporting plans to ‘do right, not rushed’ and re-prioritise ‘no regrets’ actions that drive stakeholder value.”
With a growing emphasis on transition plans, companies must balance regulatory requirements with meaningful action.
While adoption is required, implementation remains voluntary.
Businesses are encouraged to engage stakeholders early, ensuring transparency and strategic clarity.
Alan also stresses the importance of communication, urging firms to “manage the tone towards value and away from cost burden.”
The Omnibus package signals a shift in how sustainability is embedded into corporate strategy.
Policy levers such as clean energy pricing complement reporting requirements, reinforcing the EU’s climate agenda.
“The EU is deploying policy levers, other than reporting, to achieve climate targets,” Alan explains.
However, legislative complexity means that businesses must remain vigilant.
Engaging with EU institutions, particularly on Environmental, Social and Governance (ESG) standard simplifications, can help shape future regulations.
“Companies should consider how to engage with the EU institutions, where feedback is sought,” says Alan.
As the regulatory environment evolves, companies must not only comply but also leverage sustainability reporting as a strategic tool.
The Omnibus package, despite its challenges, offers a framework to integrate sustainability into business strategy effectively.
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