The key changes introduced by the EU Omnibus

Background to the EU Omnibus

To fully understand the impacts of the current regulatory landscape, we must first delve into what the omnibus packages are and what key changes to current regulations they propose.

To provide some background context, the Corporate Sustainability Reporting Directive (CSRD) came into effect in early 2023, with the European Sustainability Reporting Standards (ESRS) released shortly after. To increase competitiveness and cut down on the administrative burden imposed by the complexity of the CSRD and other regulations, The European Commission released the Omnibus Proposal on 26th February 2025. The idea here was to streamline a host of EU Green Deal initiatives, such as the CSRD, the EU Taxonomy, the Corporate Sustainability Due Diligence Directive (CS3D), and the Carbon Border Adjustment Mechanism (CBAM).

Key changes proposed by the EU Omnibus

The “Stop the Clock Directive”

Firstly, the “Stop the Clock” postponement (Directive (EU) 2025/794). This directive is the first part of the Omnibus that has come fully into effect, having been published in the Official Journal of the European Union on 16 April, 2025 and coming into force the following day on 17 April.

The directive has officially delayed key implementation dates for the CSRD, the CS3D, and the EU Taxonomy. For CSRD and the EU Taxonomy, reporting deadlines for large EU and non-EU companies, as well as listed SMEs, have been postponed by two years, with the earliest reports now due in 2028. However, first wave companies (large EU public interest entities with over 500 employees and large non-EU companies with securities on EU markets) must still report for financial years starting in 2024.

For CS3D, the deadline has been extended to 26 July 2027, and the first phase of obligations for in-scope companies has been delayed by one year to 26 July 2028. This includes EU companies with over 5,000 employees and €1.5 billion annual net worldwide turnover, and non-EU companies with €1.5 billion EU turnover. Obligations for smaller thresholds, such as EU companies with over 3,000 employees and €900 million turnover, remain unchanged, applying from 2028. Crucially, all EU Member States must incorporate these changes into domestic law by 31 December 2025, which could potentially affect local implementation timelines.

Narrowed scope and reduced content requirements

The Omnibus is proposing to remove around 80% of the companies that are currently in the scope of the CSRD, according to the European Commission, drastically narrowing who these regulations will apply to. The narrowed scope also adjusts who taxonomy reporting is applicable for, limiting mandatory taxonomy reporting to large companies with more than 1,000 employees and significant turnover or balance sheets. Smaller businesses and those with a net turnover below €450 million may choose to voluntarily disclose their taxonomy alignment, removing obligations for a sizable portion of companies and minimising compliance costs. Instead, for companies that now fall out of scope, voluntary reporting is still highly encouraged.

Reporting burdens under the ESRS and EU Taxonomy will be eased by reducing the number of mandatory datapoints and focusing on the most relevant and decision-useful information. The revisions aim to emphasise quantitative disclosures over qualitative ones and better distinguish between mandatory and voluntary requirements, as previously mentioned. The Omnibus also proposes the removal of the requirement for sector-specific ESRS, allowing companies to report using general standards instead of sector-specific requirements.

A significant addition for the EU Taxonomy would be the new materiality threshold, which exempts companies from reporting on economic activities that contribute less than 10% to their total turnover, capital expenditures, or total assets. This ensures that reporting is both relevant and focused on significant activities with meaningful sustainability contributions, reducing administrative burdens for companies whose minor activities have negligible environmental impact. Similarly, another useful proposal is the possibility to report partially aligned activities and review alignment criteria.

Audit requirements

The EU Omnibus proposal introduces significant changes to audit requirements for sustainability reporting. Notably, it eliminates the progression from limited to reasonable assurance. Under these revisions, only limited assurance engagements will be required, simplifying the compliance landscape and ensuring reduced administrative burdens for businesses. Limited assurance involves less extensive procedures compared to reasonable assurance, thus lowering costs for companies while maintaining credibility in sustainability reporting.

The role of the Committee of European Auditing Oversight Bodies (CEAOB) is pivotal during the transition period to align practices across Member States. With the Omnibus proposing to halt the plan to publish EU-level assurance standards, the CEAOB has developed non-binding guidelines on limited assurance. These aim to harmonise procedures, ensuring practitioners can evaluate sustainability statements efficiently while upholding consistency with the CSRD and ESRS.