The EU Omnibus Package: Strategic realignment of the ESG agenda for companies

The European Commission presented the comprehensive EU Omnibus Package on February 26, 2025 – a core component of the broader EU initiative "Competitiveness Compass". The announcement marked a remarkable shift in European ESG regulation: After years of steady expansion of sustainability requirements, simplifying this framework is now taking center stage. The package delivers more straightforward requirements for companies, establishing more transparent structures and enabling flexible implementation approaches – all aimed at reducing administrative burdens without abandoning the fundamental course toward sustainability. But what does this regulatory adjustment mean for companies' sustainability strategies, and what options for action arise from it?

 

The evolution of EU sustainability regulation

The European ESG regulatory landscape has undergone intensive development since the introduction of the Non-Financial Reporting Directive (NFRD) in 2014. With the Corporate Sustainability Reporting Directive (CSRD), the complexity and scope of reporting obligations reached a preliminary peak. The vision never changed: increased transparency for non-financial information and support for the transformation process toward a climate-neutral economy by 2050.

However, significant challenges emerged in practical implementation. Although CSRD was adopted in 2022, the transition into national law did not occur on schedule everywhere – several EU member states did not implement the directive promptly, causing considerable uncertainty among affected companies.

 

Core elements of the EU Omnibus Package for sustainability reporting

The EU Omnibus Package brings together various sustainability regulations, including the CSRD, the Supply Chain Due Diligence Directive (CSDDD), the Taxonomy Regulation, and the Sustainable Finance Disclosure Regulation (SFDR). The central objective is to relieve companies by streamlining reporting obligations. The regulation encompasses four key reform areas:

1. Redesign of the application scope

The reporting obligation now focuses exclusively on companies meeting the following criteria:

Separate criteria applies to companies headquartered outside the EU:

This realignment substantially alleviates medium-sized organizations and limits the previous need to request sustainability data from suppliers not subject to CSRD regulations.

2. Extended implementation periods

The reporting deadlines for the second and third waves are postponed from FY 2025 and 2027 to FY 2027 and 2028. For companies that would have been required to report from 2025 onward, this means a two-year extension of the preparation phase until the 2027 fiscal year.

 

3. Comprehensive standard simplification

• Reduction of ESG data points: The European Sustainability Reporting Standards (ESRS) originally required 1,184 different data points, including 297 quantitative indicators. The Omnibus Package initiates a fundamental assessment of these requirements regarding their practical significance and applicability.
• Improved alignment with other regulatory requirements
• Elimination of industry-specific reporting standards, giving companies greater freedom in designing their sustainability reports
• Reconceptualization of sustainability assurance: The regulation retains a limited assurance requirement, abandoning the originally planned comprehensive assurance obligation ("Reasonable Assurance"), with targeted assurance guidelines expected by 2026.

 

4. Simplifications for small and medium-sized enterprises

• The new VSME standard serves as a foundation for voluntary reporting.
• Reduction of the cascade effect: SMEs must only provide information specified in the voluntary standard

 

Important: Although small and medium-sized enterprises reporting under the VSME are no longer required to perform a double materiality assessment, for companies still falling under the CSRD, the double materiality assessment remains unchanged.

 

Simplification versus deregulation: A differentiated view

The central question is: Does the Omnibus Package signal a fundamental departure from the European sustainability agenda? This question requires nuanced consideration.

While the reform package marks a clear course adjustment, it does not represent an abandonment of the basic principle of sustainability reporting. Rather, it recognises that overly complex regulations can be counterproductive and impair the competitive position of European companies.

 

Strategic recommendations for future-oriented companies

The Omnibus Regulation is currently progressing through the legislative process in the European Parliament and the Council of the European Union. Until final adoption, companies subject to reporting requirements should continue to align their sustainability reporting with the current CSRD guidelines.

The crucial insight: The business case for value-oriented ESG management remains valid regardless of regulatory changes. Companies should use the Omnibus Package as a strategic opportunity:

The EU Omnibus Package as a strategic opportunity

The EU Omnibus Package should not primarily be understood as deregulation, but as an opportunity for strategic repositioning. It opens up the possibility for companies to transition from a purely compliance-oriented ESG strategy to a value-creation-oriented one.

In a market environment where ESG performance is increasingly used as an evaluation criterion by investors and customers, the topic retains its strategic relevance regardless of individual regulatory developments. Companies that implement sustainability as an integral part of their business strategy will be better positioned in the long term – whether through reduced capital costs, higher valuation multiples, strategic competitive advantages, maintained reputation, or increased operational efficiency.

The future-oriented response to the Omnibus Package is therefore not to scale back ESG activities, but to align them more strategically and with a clear focus on sustainable value creation instead of short-term regulatory compliance.

Related posts:

From VSME Reporting to CSRD Compliance: Navigating ESG Changes

The State of ESG Reporting - Challenges and Recommendations

Understanding ESG reporting standards: a comprehensive guide