Coming soon: The EU Omnibus Package – A critical turning point in EU’s sustainability reporting regulation

Feb 13 / Patricia Joyce. N
The European Commission's forthcoming Omnibus Package marks a pivotal moment in the evolution of the EU's sustainable finance regulatory framework. This initiative, expected to be unveiled in late February 2025, aims to streamline sustainability reporting obligations by consolidating key directives into a single, coherent regulatory mechanism. While the move is positioned as an effort to reduce the reporting burden on companies, its implications—ranging from regulatory certainty to potential dilution of sustainability standards—are fiercely debated among policymakers, investors, and industry stakeholders.

Historical context and evolution

The EU has been at the forefront of global sustainability policy, with an ambitious legislative agenda structured around the European Green Deal and the Paris Agreement commitments. Over the past five years, three cornerstone regulations have shaped corporate sustainability disclosure and due diligence requirements:
  1. The EU Taxonomy Regulation (2020): Established a classification system to define environmentally sustainable economic activities, aiming to curb greenwashing and guide investment towards genuinely sustainable projects.

  2. The Corporate Sustainability Reporting Directive (CSRD) (2023): Mandated extensive environmental, social, and governance (ESG) disclosures, significantly expanding reporting obligations for companies, including non-EU firms operating in the European market.

  3. The Corporate Sustainability Due Diligence Directive (CSDDD) (2024): Introduced obligations for companies to assess and mitigate human rights and environmental risks within their supply chains, further integrating sustainability considerations into corporate governance.
Despite their progressive intent, these regulations have been criticized for their complexity, lack of coherence, and administrative burden. Businesses, particularly SMEs, have raised concerns over compliance costs, while some political factions argue that the current framework stifles European competitiveness. Against this backdrop, the Omnibus Package is set to introduce sweeping changes to simplify and harmonize these rules.

The Omnibus package: Key proposals and stakeholder reactions

1. Reducing the reporting burden

The European Commission's "Competitiveness Compass" aims to cut reporting obligations by 25% overall and by 35% for SMEs. This initiative follows political shifts in the European Parliament elections of 2024, where the conservative European People's Party gained ground, largely campaigning on a platform critical of regulatory overreach. The proposed simplifications include:
  • Merging CSRD, CSDDD, and the EU Taxonomy into a single framework.
  • Eliminating redundancies in sustainability reporting requirements.
  • Introducing sector-specific reporting standards to enhance relevance and usability.
While these efforts are welcomed by businesses, sustainability advocates warn that a broad rollback could undermine transparency and climate goals. The Institutional Investors Group on Climate Change (IIGCC) and Eurosif emphasize that regulatory stability is essential for effective capital allocation in sustainable finance. They argue that the Omnibus Package must preserve the ambition and integrity of the existing framework, rather than weaken it for the sake of expediency.

2. Ensuring Regulatory Coherence

A core challenge in the EU’s sustainable finance regime has been the lack of alignment between different regulatory instruments. The Omnibus Package is expected to address inconsistencies by:
  • Standardizing sustainability metrics across regulations.
  • Aligning the EU Taxonomy criteria with corporate reporting standards under CSRD.
  • Addressing interoperability with international frameworks such as the ISSB and GRI.
The EU Platform on Sustainable Finance has underscored the need for simplification without compromising the robustness of sustainability disclosures. Their recommendations advocate for clearer technical screening criteria under the Taxonomy and the introduction of proportionality measures to ease reporting for SMEs without lowering environmental standards. The International Capital Markets Association (ICMA) called for regulatory predictability, warning that prolonged uncertainty could deter investment and hinder the transition to a sustainable economy. 

3.  Looking ahead

As the Omnibus Package advances through the legislative process, several important questions arise:
  • Will the simplification initiatives promote genuine regulatory efficiency, or could they undermine the EU’s commitment to climate action?
  • What will be the response of financial markets to potential shifts in disclosure requirements?
  • Is it possible for the EU to sustain its global leadership in sustainable finance while also addressing industry concerns regarding compliance costs?
Stay tuned for the launch of the Omnibus Package to learn how it will balance enhancing economic competitiveness while upholding ambitious sustainability goals. 

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