EU Commission publishes proposal for an omnibus package - Is sustainability reporting for small and medium-sized enterprises (SMEs) about to be abandoned?
The proposal for a so-called ‘EU Omnibus Regulation’, which was published by the EU Commission on 26.2.2025, provides for extensive simplifications of the requirements for businesses with respect to the CSRD, the EU Taxonomy and the CSDDD. The motions adopted in November 2024 meant that a reduction in sustainability reporting obligations of approx. 25% was on the table. However, the EU’s current proposal provides for significantly more extensive simplifications.
Reduction of the scope of reporting companies and postponement of the CSRD
A good two years after its coming into force, the CSRD is about to be thoroughly reworked. While in its original version, mandatory sustainability reporting is phased in over time for large (capital market-oriented) companies as well as for capital market-oriented SMEs, however, once the Omnibus Regulation is adopted the scope of reporting companies will now be drastically reduced. Up to now, large companies within the meaning of the German Commercial Code would have been subject to the sustainability reporting requirement. According to the proposal, the requirement will apply only to those companies that have reported
- at least 1,000 employees and
- either sales revenues of at least €50m, or a balance sheet of at least €25m in their annual financial statements.
So-called wave 2 companies, which should be classified as large businesses and which, according to the original version of the CSRD, would have been required to report for the first time on the 2025 financial year, will moreover benefit from a postponement of two years.
Greatly easing the burden for SMEs …
In particular, the aim is to reduce the reporting requirements for SMEs to a minimum. According to the Omnibus proposal, capital market-oriented SMEs will thus not be in the scope of the CSRD any more. Furthermore, if there is no particular reason, large companies will no longer be able to request from companies with fewer than 500 employees any additional sustainability information that goes beyond the voluntarily applied specific ESRS for SMEs (the VSME standard).
… and in respect of the EU Taxonomy
As regards the EU Taxonomy, which has to be applied in addition to the CSRD, the proposal will result in a further easing of the burden in this respect. Accordingly, companies with up to 1,000 employees and sales revenues below €450m will no longer have to fully report on the EU Taxonomy. Insofar as they engage in (Taxonomy-aligned) activities, then they will disclose the sales revenue and CapEx associated with them. The reporting on OpEx will remain voluntary for them.
Postponement and simplification of the EU Supply Chain Directive (CSDDD)
In relation to the CSDDD, the proposal for the Omnibus Regulation likewise provides for extensive changes. First of all, the mandatory application of the CSDDD will be postponed by one year. The first group of obligated companies that were originally supposed to comply with their obligations as of July 2027 will thus benefit from a postponement to July 2028. Contrary to what was envisaged previously, the due diligence requirements for the reporting companies will now not apply to the entire value chain any more. Instead of that, when obtaining sustainability information, they will be able to confine themselves to so-called tier 1 suppliers. Moreover, the obligation to ensure that companies falling under the CSDDD can be held liable under civil law will be dropped - up to now this was an essential aspect of the regulation.
