The EU Omnibus Regulation

The EU “Omnibus” Regulation (COM(2025) 50 final) refers to a package of legislative proposals introduced by the European Commission in early 2025 to simplify and streamline EU sustainability-related laws. Announced on 26 February 2025, this Omnibus simplification package bundles together targeted amendments to several existing regulations and directives – notably in corporate sustainability reporting, due diligence, sustainable finance, carbon border measures, and investment programs.

The initiative is part of a broader Commission strategy to “cut red tape” and reduce administrative burdens on companies, while still advancing the EU’s climate and sustainability objectives. In essence, the Omnibus Regulation consolidates multiple updates into one coordinated reform, aiming to create a more coherent and business-friendly regulatory framework for sustainability in the EU.

Legislatively, the Omnibus package comprises several proposals under the ordinary procedure. These include amendments to the Corporate Sustainability Reporting Directive (CSRD) and the draft Corporate Sustainability Due Diligence Directive (CSDDD), changes to the EU Taxonomy Regulation, simplification of the Carbon Border Adjustment Mechanism (CBAM), and tweaks to EU investment instruments (e.g. InvestEU).

By packaging these changes together, the Commission signaled an intent to address overlaps and inconsistencies across related laws in one go, rather than piecemeal, thereby “streamlining the EU’s existing sustainability framework”. The proposals were promptly transmitted to the European Parliament and Council in Q1 2025 for review and adoption and have been treated as a legislative priority given their significance for EU businesses and Green Deal policies.

The Omnibus Regulation’s core objectives are to simplify compliance, reduce burdens, and enhance EU competitiveness without abandoning sustainability goals. Key aims include:

• Reduce Administrative Burdens: Deliver a “25% reduction in administrative burdens” (and 35% for SMEs) by eliminating or scaling back onerous reporting and due diligence requirements. This responds to industry complaints about regulatory complexity and high compliance costs, especially for smaller companies.

• Enhance Competitiveness and Investment: Create a more favorable business environment to help EU companies “grow, innovate, and create quality jobs”. By cutting red tape, the EU hopes to boost competitiveness vis-à-vis other markets and unlock up to €50 billion in additional investment capacity for strategic priorities.

• Streamline Overlapping Rules: Harmonize and consolidate multiple sustainability frameworks into a coherent system. The Omnibus package “brings together proposals in a number of related fields” – aligning reporting timelines, definitions, and standards – so that companies face one coordinated set of obligations instead of fragmented or duplicative rules.

• Focus on Proportionality: Refocus obligations on the largest companies that have the most impact on people and planet5. A guiding principle is to relieve small and medium-sized firms of disproportionate burdens and “ensure that sustainability requirements on large companies do not burden smaller companies in their value chains”. This was seen as crucial to prevent stifling SMEs and to ensure rules are cost-effective.

• Maintain Climate & Sustainability Ambitions: Officially, the simplification is designed to retain the EU’s environmental and social objectives while improving efficiency. The Commission emphasizes that 99% of emissions covered by CBAM and the vast majority of corporate impacts will remain under regulation despite the cuts. However, critics note a tension in ensuring that “simplification is not at the expense of the climate” or human rights. (Navigating this balance is part of the legislative debate, as discussed below.)

Scope and Key Provisions

The Omnibus Regulation spans several policy areas in sustainability and corporate governance. The main components and their proposed changes are:

• Corporate Sustainability Reporting (CSRD) & Taxonomy: The CSRD – which vastly expanded the number of companies required to report ESG information – would be refocused on only large companies. The Omnibus proposal raises the scope threshold to companies with over 1,000 employees (and financial criteria), removing ~80% of companies from CSRD’s originally intended scope. In practice, only the very largest firms would remain obliged to report, significantly lightening the load on medium-sized companies. To avoid a transparency gap, the Commission will offer a voluntary reporting standard for SMEs so that information can still be shared down supply chains on a limited basis. Additionally, the mandatory reporting standards (the European Sustainability Reporting Standards, or ESRS) will be simplified – sector-specific disclosures are dropped and audit requirements will stay at the “limited assurance” level instead of escalating to “reasonable assurance”. The EU Taxonomy climate disclosures are similarly narrowed: only companies meeting the CSDDD’s large-company threshold will be required to report Taxonomy-aligned revenue/assets, with others allowed to report voluntarily. The proposal even introduces new flexibility, such as permitting companies to count partially sustainable activities toward Taxonomy goals (to encourage transition efforts) and cuts the Taxonomy reporting templates by ~70% to reduce complexity. These changes aim to make sustainability reporting “more accessible and efficient”, focusing on big players while easing compliance costs for thousands of smaller firms.

• Corporate Sustainability Due Diligence (CSDDD): The draft CSDDD (often called the “CS3D”) is revised to streamline human rights and environmental due diligence obligations. Notably, companies would only be required to monitor and address risks in their own operations, subsidiaries, and direct (‘tier 1’) suppliers – “focusing systematic due diligence requirements on direct business partners” – rather than mapping their entire value chains. This represents a major narrowing of scope; indirect suppliers deeper in the supply chain are largely exempted unless a company has “objective and verifiable information” of abuses beyond tier 1. The Omnibus proposal also reduces the frequency of due diligence assessments: instead of annual reviews, companies could update their risk analysis every five years (with ad-hoc checks as needed). Another significant change is the removal of the proposed EU civil liability regime – the Commission deleted the uniform liability provisions that would have made companies automatically liable for harms from supply-chain violations. While victims could still sue under national laws, there will be no new EU-level cause of action, which NGOs warn “strips victims of their ability to go to court” and means less accountability for companies. Other simplifications include clarifying that required climate transition plans under CSDDD need only outline measures (not necessarily achieve targets), and giving companies more time to adopt such plans. Overall, these revisions aim to “simplify due diligence to support responsible business” by focusing efforts where risks are highest and avoiding undue burdens on SMEs and lower-tier suppliers. (At the same time, the Council’s draft adds a safeguard: if credible reports show serious abuses beyond tier 1, companies would still be obliged to investigate deeper layers.)

• Carbon Border Adjustment Mechanism (CBAM): The Omnibus package includes a regulation amending the new CBAM, with the goal of making this carbon import tax easier to implement “without compromising its climate goals”. The headline change is a new “de minimis” exemption: importers that bring in less than 50 tonnes per year of CBAM-covered goods will be exempt from CBAM requirements. This volume-based threshold (replacing a much narrower exemption for low-value consignments) is expected to exclude ~90% of importers – mostly SMEs and individuals importing small quantities – from CBAM’s carbon reporting and certificate-buying obligations. Crucially, though, because it’s mainly the smallest importers, over 99% of total embedded emissions in imported steel, cement, fertilizers, etc., would still be covered by the mechanism. For companies that remain under CBAM, the proposal simplifies compliance procedures: it streamlines the importer authorization process, simplifies how embedded emissions are calculated and verified, and clarifies how importers can claim credit for any carbon price paid abroad. Anti-evasion rules are also strengthened to prevent circumvention of the carbon levy. These CBAM tweaks are presented as a win-win: they “exempted 90% of importers ... to facilitate competitiveness,” while keeping the environmental coverage essentially intact (99% of emissions). The intent is to ensure SMEs are not overwhelmed by the new carbon border rules, as part of the broader push to “boost EU competitiveness” through smarter regulation.

·       EU Investment Programmes (InvestEU and others): A second part of the Omnibus package (sometimes dubbed “Omnibus II”) focuses on simplifying EU investment funds and financial instruments to spur growth. The Commission proposes changes to InvestEU, the EU’s flagship investment fund, as well as to earlier instruments (like EFSI and other legacy funds), to optimize the use of available capital. One key measure is to reallocate unused funds and past returns into new investments: by tapping into returns from prior projects and unspent money, the EU could increase InvestEU’s guarantee capacity, potentially mobilizing an extra €50 billion in public and private investment into the economy. The rules for Member States to contribute national funding into InvestEU would be simplified, making it easier for countries to channel money to projects via the EU program. Administratively, the Omnibus changes aim to streamline application and reporting requirements for investment projects – reducing paperwork for implementing partners, financial intermediaries, and ultimately SMEs that benefit from EU-funded loans. The Commission estimates about €350 million in cost savings from these simplifications in the investment sphere alone. By cutting red tape, the EU hopes to “allow more funding to be made available to businesses” and accelerate financing for priorities like the green and digital transitions. These investment-related proposals received slightly less public debate than the sustainability reporting measures, but they form a crucial part of the package’s promise of stimulating growth alongside deregulation.

• 26 February 2025: The European Commission introduced legislative proposals targeting simplification in sustainability reporting, due diligence, CBAM, and investment rules, projecting over €6 billion in compliance cost savings.

• March 2025: EU heads of state endorsed the Omnibus agenda, urging swift progress, especially on a “stop-the-clock” measure to delay CSRD deadlines, reflecting broad political consensus for immediate relief.

• April 2025: The Council of the EU, with Parliament’s cooperation, adopted an interim directive postponing CSRD reporting start dates by two years for certain companies and delaying CSDDD transposition by one year to provide legal certainty during ongoing negotiations.

• 27 May 2025: The Council approved a negotiating mandate introducing a 50-tonne import exemption and related simplifications in CBAM, aiming to boost SME competitiveness while covering about 99% of emissions.

• 23 June 2025: The Council set a negotiating position narrowing CSRD scope by adding a €450 million turnover criterion and raising thresholds for CSDDD obligations, while endorsing due diligence streamlining and postponing deadlines to mid-2028 for large companies.

• June 2025: The EP rapporteur suggested even higher thresholds (>3,000 employees and >€450 million turnover) for both CSRD and CSDDD, alongside removing some climate obligations and limiting member states’ ability to exceed EU minimum rules, reflecting a push for maximal burden reduction.

• 18 June 2025: Parliament and Council negotiators reached an informal deal on CBAM simplifications, including the SME exemption, preserving climate integrity by covering 99% of emissions and exempting about 90% of importers, pending formal approvals later in 2025.

• Late 2025: The full Omnibus Regulation, including CSRD, CSDDD, and InvestEU amendments, is expected to be finalized.

• 2026 to 2028: Phased implementation of the Omnibus Regulation, allowing companies and regulators to adapt to the new simplified regime.