Understanding the Omnibus Act (CSRD, CSDDD, Green Taxonomy)

The European Commission recently unveiled an "Omnibus" legislative proposal, aimed at simplifying sustainability reporting obligations for companies. This initiative is part of a wider effort to reduce the administrative burden on European companies by 25%, and up to 35% for SMEs, while maintaining the environmental and social objectives of the European Green Deal.

What is Omnibus?

The Omnibus proposal on sustainability, published on February 26, aims to reduce regulatory complexity by simplifying three EU laws:

✅ Corporate Sustainability Reporting Directive (CSRD) - standardizes corporate sustainability reporting by requiring companies to disclose both the impact of sustainability factors on their business and their impact on the environment and society (double materiality).

✅ European Taxonomy Regulation (EU TR) - defines which economic activities are considered environmentally sustainable to guide investment decisions and align financial flows with EU climate objectives.

✅ Corporate Sustainability Due Diligence (CS3D) Directive - obliges companies to identify, prevent and mitigate negative environmental and human rights impacts across their operations and value chains.

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Reducing the scope of the CSRD

One of the main changes concerns the Sustainability Reporting Directive (SRD). The proposal is to restrict its application to companies meeting the following criteria:

• Number of employees: over 1,000 (previously 250)

and

• Sales: over 50 million euros

or

• Total assets: over €25 million

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This revision would exclude almost 80% of the companies initially covered by the CSRD, concentrating reporting obligations on the largest structures.

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Reduced reporting requirements

In addition to reducing the number of companies concerned, the "Omnibus" proposal introduces several measures designed to lighten reporting obligations:

• Abolition of sector-specific standards: to simplify sector-specific requirements.
• Reducing the number of mandatory data points: focusing on essential quantitative data.
• Maintaining dual materiality: companies will have to continue to assess both the impact of their activity on the environment and society, and the impact of sustainability issues on their performance.
• Limited assurance for audits: abandoning the transition to reasonable assurance, retaining a lighter approach to auditing sustainability reports.

Limited assurance offers a moderate degree of confidence, based on a less thorough examination in which the auditor simply checks that there are no elements calling into question the reliability of the information (without detecting all possible errors). Reasonable assurance, on the other hand, involves much more detailed checks, enabling the auditor to conclude with a higher degree of certainty that the information is free from material misstatement, while recognizing that this certainty is not absolute.

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Draft directive introducesValue Chain Cap

Companies subject to the CSRD will no longer be able to demand data from suppliers that goes beyond the VSME standard.

SMEs with fewer than 1,000 employees will therefore be protected from excessive demands.

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The VSME (Voluntary Sustainability Reporting Standard for SMEs) is a voluntary sustainability reporting standard specially designed for SMEs and companies not subject to CSRD. It is a voluntary framework based on a simplified ESG reporting format. Large companies subject to the CSRD will only be able to require SMEs to provide the information defined by this standard.

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Implications for companies not subject to CSRD :

• They will no longer have a legal reporting obligation, but will still be able to communicate on sustainability.
• Investors and banks will be able to request information, but without a mandatory framework. However, the constraints on investors/banks remain, so requests are likely to continue.

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Amendments to the Duty of Vigilance Directive (CSDDD)

The Corporate Sustainability Duty of Care Directive (CSDDD) is also affected by this simplification proposal:

• The CSDDD compliance date was set for July 26, 2027, but has now been pushed back to July 26, 2028. In addition, the implementation of a climate transition plan is no longer mandatory.
• Focus on direct business partners: due diligence obligations would be limited to direct relationships, except in the case of proven risks in the indirect supply chain.
• Reduced frequency of assessments: audits would be reduced from annual to every five years.
• The application deadline is July 26, 2028.‍
• Protecting SMEs: large companies would no longer be able to demand excessive information from business partners with fewer than 500 employees.‍
• Greater flexibility for suppliers: rather than immediately breaking off a business relationship in the event of a breach, companies would be encouraged to work out corrective plans with their partners.

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Changes to the Green Taxonomy

The Omnibus proposal also makes adjustments to reporting obligations linked to the European Taxonomy, the framework for classifying sustainable economic activities. Until now, companies subject to the CSRD were required to declare their alignment with the Taxonomy, providing key performance indicators (KPIs) detailing the proportion of their sales, investments (CapEx) and operating expenses (OpEx) associated with sustainable activities.

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• Scope of the taxonomy: only companies with more than 1,000 employees and annual sales of at least €450 million are concerned.
• Companies below this threshold will be able to declare their alignment with the Taxonomy, but without strict obligation.
• Data point: Reduction in the number of data items required by around 70%.
• Greater flexibility has been granted to companies in transition: they will now be able to report partial compliance with the Taxonomy criteria, even if they do not yet meet all the alignment criteria.

Book a demo with Waro to prepare for regulatory compliance and simplify your environmental reporting.

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