The European Commission’s Omnibus Proposal marks a significant shift in the sustainability
reporting landscape, with sweeping changes to the Corporate Sustainability Reporting Directive
(CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy
Regulation. While positioned as a simplification effort to ease the administrative burden on
companies, the proposal raises important questions about competitiveness, regulatory certainty, and
the EU’s commitment to sustainability goals.
For international businesses, these changes could mean reduced compliance obligations,
but they also introduce uncertainty and potential fragmentation in sustainability reporting.
CSRD: Shrinking Scope and Fewer Reporting Obligations
• The CSRD threshold has been raised, meaning only companies with 1,000+ employees and
€450M turnover will be required to report (previously 250 employees, €40M turnover).
• This drastically reduces the number of covered companies by 80%, removing tens of thousands
of businesses from formal reporting obligations.
• Sector-specific sustainability reporting standards may be scrapped entirely, affecting how
businesses benchmark sustainability efforts across industries.
• The shift towards voluntary reporting could lead to reduced transparency and comparability,
potentially creating a competitive advantage for companies that continue disclosing voluntarily.
What this means for international businesses:
• Multinational companies with EU operations will have a reduced regulatory burden if they are
no longer required to report.
• Non-EU businesses operating in the EU (previously covered under CSRD’s turnover-based
threshold) may now fall out of scope.
• However, large international businesses may still face reporting pressures from investors,
suppliers, and consumers who expect ESG disclosures, even if no longer legally required.
CSDDD: Weakening Due Diligence and Liability Risks
• Due diligence obligations are now limited to direct suppliers (Tier 1) instead of the full supply chain.
• The removal of civil liability provisions means companies will not face legal consequences for
failing to meet sustainability obligations.
• National governments will have limited flexibility to impose stricter due diligence laws,
effectively setting a ceiling on ESG regulations across the EU.
What this means for international businesses:
• Supply chain compliance will become less complex, as businesses will only need to monitor
direct suppliers.
• Downstream ESG risks (e.g., human rights violations or environmental harm deeper in the supply chain) may still be a concern, particularly for companies with strong voluntary sustainability commitments.
• Companies already investing in comprehensive ESG due diligence may face reputational risks
if they scale back efforts in response to regulatory rollbacks.
EU Taxonomy: Optional Compliance and Delayed Application
• Sustainability reporting under the EU Taxonomy may become voluntary, removing mandatory
alignment for companies outside the revised CSRD scope.
• Climate transition plans may be reduced to a “tick-box” exercise, limiting enforcement mechanisms.
• The reporting deadline for many companies has been delayed by two years, creating
uncertainty for businesses that have already prepared for compliance.
What this means for international businesses:
• Investors and financial markets may still expect climate risk disclosures, even if regulatory
requirements are loosened.
• Companies doing business in both the EU and stricter jurisdictions (e.g., the U.S., UK, or parts of
Asia) may face conflicting reporting expectations.
• Businesses that have already invested in CSRD/CSDDD compliance may now question whether
to continue these efforts or wait for further regulatory clarity.
Regulatory Certainty vs. Sustainability Leadership: What’s at Stake?
The Omnibus Proposal raises key questions about the balance between competitiveness and
sustainability:
• Does simplification equal deregulation, or does it simply shift responsibility from mandatory
reporting to market-driven ESG efforts?
• Will companies that have invested heavily in sustainability reporting now face a competitive
disadvantage against those no longer required to report?
• How will international businesses navigate fragmented sustainability regulations, especially if
other jurisdictions maintain stricter ESG disclosure laws?
While the EU remains committed to its Green Deal, the Omnibus Proposal signals a shift in how
sustainability regulations will be enforced—from strict legal obligations to a more voluntary,
business-driven approach.
What’s Next?
The proposal now moves to the European Parliament and the Council of the EU, where further
changes may still be made. Businesses should monitor the discussions closely, as final regulations
will shape the future of corporate sustainability compliance in Europe and beyond.
In the meantime, companies should assess their long-term ESG strategy:
Should they continue voluntary reporting to maintain transparency and investor confidence?
How will supply chain due diligence evolve without regulatory enforcement?
Will aligning with international sustainability frameworks (such as ISSB or GRI) become a better alternative to EU-specific regulations?
As the Omnibus debate unfolds, the international business community needs to focus on why they
started their sustainability journey.
