The European Commission has announced significant changes to its Corporate Sustainability Reporting Directive (CSRD) and introduced a comprehensive package of proposals aimed at simplifying EU sustainability reporting requirements and reducing administrative burdens. The broader ‘Omnibus’ package reflects the Commission’s push to simplify compliance while maintaining sustainability goals.
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Key changes to CSRD and sustainability reporting
The revised framework narrows the scope of the Corporate Sustainability Reporting Directive (CSRD) and makes sustainability reporting more efficient for businesses.
Under the original CSRD framework, companies with at least 250 employees, €50 million in revenue, or €25 million in assets were required to report on their sustainability impacts. The new proposal raises the threshold to companies with more than 1,000 employees while maintaining the same financial benchmarks. As a result, around 80% of companies that were preparing to comply with CSRD will now be exempt from mandatory reporting. However, many of these companies have already started tracking and disclosing their sustainability performance, driven by investor expectations, consumer demand, and internal ESG commitments.
Additionally, the reporting timeline for companies still covered under CSRD will be pushed back by two years. Large companies originally expected to report in 2025 will now begin in 2026, and subsequent waves of companies will also see a two-year delay. This postponement provides companies with additional time to refine their sustainability strategies—though many have already made significant progress.
Further adjustments reduce the complexity of reporting requirements, particularly for smaller companies in supply chains. Large companies will no longer be able to impose extensive sustainability data requests on smaller business partners, easing the administrative burden across value chains.
Non-EU parent companies will now fall under the CSRD’s scope only if they generate at least €450 million in EU-derived turnover, a significant increase from the previous €150 million threshold. Additionally, they must either have an EU subsidiary classified as a large undertaking under the revised criteria or an EU branch with at least €50 million in turnover, up from the previous €40 million requirement. These adjustments align the thresholds for non-EU companies with those applied to large EU-based businesses.
To further ease compliance burdens, the Commission has committed to revising the European Sustainability Reporting Standards (ESRS). These revisions will reduce the number of required data points, eliminate sector-specific reporting standards, and lower assurance requirements.
Smaller businesses removed from the CSRD’s scope will have the option to engage in voluntary sustainability reporting. The EU is working on a simplified reporting standard for SMEs, based on the voluntary sustainability standards (VSME) recently released by EFRAG. Importantly, larger companies and banks will also be restricted in how much sustainability data they can request from smaller businesses in their supply chains, preventing excessive reporting burdens from being shifted downstream.
Beyond CSRD, the EU Taxonomy reporting requirements have also been adjusted. Only the largest companies—those in the Corporate Sustainability Due Diligence Directive (CSDDD) scope—will be required to report their alignment with the EU Taxonomy. Smaller companies will have the option to voluntarily report on their sustainable activities, and reporting templates will be reduced by 70% to streamline compliance.
Additionally, the European Commission is introducing a financial materiality threshold for Taxonomy reporting and a new partial alignment reporting option, allowing companies to disclose activities that are in transition toward sustainability rather than meeting full alignment requirements immediately.
These measures are part of the EU’s broader effort to reduce regulatory complexity, unlock investment capacity, and support businesses in balancing sustainability goals with competitiveness. If fully implemented, the changes are estimated to bring annual administrative savings of €6.3 billion and mobilise €50 billion in additional investment capacity for sustainable projects, thereby boosting voluntary sustainability targets.
Read more: What is CSRD and how does it affect your business?
Broader implications for corporate sustainability regulations
Beyond the CSRD, the Omnibus package introduces changes to other key sustainability regulations:
- Corporate Sustainability Due Diligence Directive (CSDDD): Due diligence obligations will now focus primarily on direct (Tier 1) business partners unless there is plausible evidence of risks further down the supply chain. The requirement for businesses to monitor their supply chains annually has been relaxed to every five years. Additionally, the obligation to terminate business relationships as a last resort has been removed.
- EU Taxonomy Regulation: Only companies with over €450 million in revenue will be required to report their EU Taxonomy alignment, while others can do so voluntarily. Reporting templates will also be simplified to reduce compliance burdens.
- Carbon Border Adjustment Mechanism (CBAM): The new proposal introduces a de minimis threshold that will exempt around 90% of importers from CBAM obligations. The Commission states that despite this exemption, over 99% of emissions will still be covered under the mechanism.
The Commission argues that these changes will reduce corporate administrative costs by an estimated €6.4 billion annually while still maintaining progress toward the EU’s sustainability goals. However, critics—including environmental groups, investors, and some policymakers—worry that this rollback could weaken corporate accountability and reduce the availability of ESG data for investors.
Potential effects on carbon markets and offsetting initiatives
One of the most significant takeaways from the CSRD revision is the increased flexibility for businesses in shaping their sustainability strategies. While reporting obligations have shifted, many companies—particularly those with strong investor or consumer-facing brands—are expected to continue their sustainability efforts.
Notably, CSRD’s original framework did not count carbon offsetting as a recognised emissions reduction method. This meant that companies subject to the regulation often had limited room to allocate resources toward voluntary carbon market participation. With the revised framework, businesses may now have more opportunities to integrate offsetting into their sustainability strategies—a shift that could encourage greater investment in high-quality carbon projects.
This shift could be beneficial for carbon project developers. Companies that continue voluntary reporting on their carbon emissions may see offsets as a more viable part of their sustainability strategy, particularly if they no longer have to divert as many resources toward compliance-driven reporting.
Read more: Amazon, ExxonMobil, and Microsoft push for stronger standards in carbon offsetting
Of course, the impact of these regulatory changes will vary by company. While some may choose to scale back their sustainability disclosures, others will recognise the competitive advantage of maintaining transparency and leadership—regardless of whether reporting is mandated.
What’s next?
The Omnibus proposal will now be reviewed by the European Parliament and the European Council. If approved, the changes will take effect following their publication in the EU’s Official Journal. Given the EU’s stated commitment to further reducing regulatory burdens, additional adjustments to sustainability reporting frameworks could follow.
However, the most forward-looking businesses aren’t waiting to see what happens next—they are already positioning themselves for long-term sustainability leadership.
Companies that voluntarily integrate sustainability into their strategies today will be the ones setting the benchmark for the future.
Read more: Aligning with CSRD: the smart move for future-proofing your business
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