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European Commission’s Omnibus Proposal: What It Means for CSRD Compliance

On 26 February 2025, the European Commission introduced the first Omnibus Proposal on sustainability reporting. If adopted, it would bring significant amendments to the Corporate Sustainability Reporting Directive (CSRD). The proposed revisions aim to reduce administrative burdens while preserving the directive’s focus on transparency and accountability. As the proposal is still under consideration, businesses should closely monitor its progress and prepare for potential compliance updates.

This article outlines the CSRD’s background, the proposed changes, and practical steps for businesses—both within and outside the EU—to prepare if the proposal is approved.

What Is the CSRD?

The Corporate Sustainability Reporting Directive (CSRD) was developed to enhance and expand upon the earlier Non-Financial Reporting Directive (NFRD). Adopted in 2022, the CSRD requires companies to report on their environmental, social, and governance (ESG) performance.

While the NFRD introduced the foundation for non-financial disclosure, it fell short of meeting stakeholder information needs. The CSRD was therefore designed to improve accountability, consistency, and transparency in sustainability reporting, allowing investors, regulators, and stakeholders to make more informed decisions.

The ESRS Framework

To support the CSRD, the European Sustainability Reporting Standards (ESRS) were developed by the European Financial Reporting Advisory Group (EFRAG). The ESRS provides a structured framework for companies to report sustainability data in a transparent, comparable, and standardized way.

Links to Other Reporting Standards

The CSRD and ESRS frameworks align closely with other major sustainability standards, including the Sustainable Finance Disclosure Regulation (SFDR), the Global Reporting Initiative (GRI), and the Task Force on Climate-related Financial Disclosures (TCFD). This alignment enables companies to streamline reporting across frameworks, fostering a more cohesive global approach to sustainability disclosure.

A Brief History of the CSRD

• 2014: Introduction of the NFRD, requiring certain large companies to disclose non-financial information.

• 2022: Adoption of the CSRD, expanding reporting scope and depth.

• 2023–2024: Development of the ESRS to guide CSRD compliance.

• 2025: Launch of the Omnibus Proposal, introducing potential changes to scope, timelines, and obligations.

Key Proposed Changes in the Omnibus Proposal

ChangeDetailsScope narrowingThe CSRD would apply to companies with more than 1,000 employees and a net turnover of €450 million.Delayed implementationThe compliance deadline would be postponed by one year.Sector-specific ESRS pausedIndustry-specific sustainability standards would be temporarily suspended.Reduced due diligence frequencySupply chain assessments would occur every five years instead of annually.Voluntary EU Taxonomy alignmentCompanies could choose whether to align with the EU Taxonomy.Reduced penaltiesFinancial penalties and mandatory contract terminations for non-compliance would be relaxed.

What Remains Unchanged?

Several core elements of the CSRD would stay intact:

• Sustainability reporting obligations: Companies must continue to report ESG performance in line with the ESRS.

• Reporting integration: Sustainability data must still be included within annual and management reports.

• Assurance requirements: Reports must undergo external assurance for accuracy.

• Digital tagging: ESG data must remain digitally tagged for compliance with CSRD’s reporting standards.

Double Materiality Still Central

The principle of double materiality remains a cornerstone of the CSRD. Companies must assess and disclose:

• Financial materiality: How sustainability issues affect business performance.

• Impact materiality: How the company’s activities impact society and the environment.

This dual perspective ensures comprehensive reporting that captures both corporate risk and social responsibility.

Which Companies Fall Under the Revised Scope?

If the proposal is adopted, the CSRD would apply to:

• Companies with over 1,000 employees and €450 million in turnover.

• Listed companies on EU-regulated markets, including non-EU parent companies with EU subsidiaries.

• Large non-listed companies meeting financial and employee thresholds.

Smaller businesses that previously qualified may now be exempt, reducing compliance pressures for many SMEs.

Implications for Non-EU Companies

Non-EU companies would still need to comply with the CSRD if they:

• Generate €450 million or more in EU turnover.

• Have an EU subsidiary or branch meeting the reporting thresholds.

• Are listed on an EU-regulated market.

Such companies must align their reporting with the ESRS and ensure compliance with EU disclosure rules.

What Must Be Reported Under the CSRD?

Companies must disclose detailed sustainability information across three main areas:

• Environmental: Greenhouse gas emissions, energy use, water consumption, and waste management.

• Social: Labor practices, human rights policies, diversity, and community engagement.

• Governance: Board structure, risk management, and legal compliance.

These disclosures provide stakeholders with a complete view of a company’s sustainability performance.

How to Prepare for Compliance

If the Omnibus Proposal becomes law, companies should take the following steps:

1. Conduct a gap analysis – Identify discrepancies between current reporting and CSRD/ESRS standards.

2. Implement robust data systems – Automate and centralize ESG data collection.

3. Apply double materiality – Assess both financial and impact dimensions.

4. Engage stakeholders – Collaborate with investors, auditors, and regulators.

5. Secure third-party assurance – Validate the reliability of sustainability disclosures.

Reporting Format

Sustainability reports must be submitted annually, digitally tagged, and integrated into company management reports. Transparency and verification remain essential, ensuring that stakeholders can access reliable, comparable data to guide decision-making.

The Role of ESG Software in Compliance

The right ESG software can streamline the compliance process by:

• Automating ESG data collection and reducing manual errors.

• Aligning reports with ESRS standards through built-in templates.

• Tracking supply chain impacts and risks.

• Generating audit-ready, externally assured reports.

The Road Ahead

The Omnibus Proposal represents a major step toward refining the CSRD—balancing reduced administrative burden with continued transparency. While the proposal aims to make compliance more practical, companies must remain proactive. By leveraging ESG tools, strengthening governance, and engaging stakeholders, businesses can not only achieve compliance but also use sustainability reporting as a driver of long-term value and trust.

Current situation:

• Postponement of the 20% tariff for exports from the EU to the US for 90 days.
• The newly introduced 10% blanket tariff on all imports into the US, except for strategic commodities, remains in force.
• The 25% tariffs on imports of steel, aluminium and cars remain unchanged.

Other important information:

• A 10% ad valorem tariff will be applied to all US trading partners.
• The introduction of the so-called "reciprocal tariffs" on a group of countries that the US considers to be treating unfairly.
  • These tariffs will apply to major trading partners, including the European Union.
  • The EU will be subject to a "reciprocal duty" of 20%.
• The additional ad valorem duties will be in force until the President decides to fulfil, resolve or mitigate the said conditions.
• Reciprocal duties will be added to the regular tariffs.

The European Union is planning a third phase of the Tobacco Products Directive, known as TPD III (Tobacco Product Directive III). This new regulation aims to further reduce the use of tobacco and related products in EU Member States.

The main points of TPD III:

1. Tightening the regulation of electronic cigarettes and e-liquids

2. Extension of the ban on flavoured tobacco products

3. Increase the minimum size of health warnings on packaging

4. Introduction of uniform packaging for all tobacco products

5. Restrictions on advertising and promotion of tobacco products on the Internet

6. Tightening control of online sales of tobacco products

7. Establishment of a system for the monitoring and tracing of tobacco products

TPD III aims to reduce the attractiveness of tobacco products, especially for young people, while raising awareness of the health risks associated with smoking. This new directive is expected to have a significant impact on the tobacco industry and consumers across the European Union.

The exact date for the implementation of TPD III is not yet set, but it is expected to come into force in the coming years. EU Member States will then have to implement this directive into their national legislation.

It is important to monitor the development of TPD III, as it will have a significant impact on the market for tobacco products, including e-cigarettes and alternative products. Consumers, retailers and manufacturers should prepare for the upcoming changes in tobacco regulation in the European Union.