What the new EU Omnibus Regulation means for your business

What is the Omnibus?

In November 2024, the European Commission indicated that it was considering consolidating sustainability regulations into one Omnibus to reduce the regulatory burden for EU businesses. Whilst subject to legislative approval by the European Parliament and EU member states, at the end of February 2025 the Commission announced a new Omnibus package of proposals aimed at streamlining and simplifying sustainability reporting requirements for EU businesses and aligning existing regulatory frameworks.

The proposals will reduce complexity of requirements for all EU businesses, most notably SMEs and mid-size, and focus the regulatory framework on the largest companies that are likely to have a bigger impact on the climate and the environment.

How does this affect UK businesses?

The Omnibus mainly impacts EU-based organisations. However, UK companies will be affected if they have business operations based in the EU or securities listed on an EU regulated market. The proposed changes also affect UK businesses exporting certain goods to the EU (highlighted in CBAM below).

Whilst the proposals are estimated to result in savings in annual administrative costs of around EUR 6.3 billion, the proposed Omnibus does create some uncertainty around potential changes to key regulations, namely the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy.

Corporate Sustainability Reporting Directive (CSRD)

CSRD is Europe’s key framework for corporate sustainability disclosures. The requirement for Double Materiality remains a key element of the CSRD, meaning that in scope companies must still report on both how sustainability affects their business and their impact on people and the environment. What will change?

80% of companies removed from CSRD scope. Compliance limited to only large organisations (1,000+ employees and either €50 million+ turnover or €25 million+ balance sheet).
SMEs and mid-sized companies (under 1,000 employees) will no longer be required to report but can voluntarily disclose sustainability metrics.
Two-year postponement for reporting deadlines. Companies that were set to report in 2026 or 2027 now have until 2028 to comply, except those in the first wave of CSRD (large listed companies and public-interest entities with over 500 employees).
Removal of the potential for a reasonable assurance standard.
No longer any mandatory sector-based sustainability standards.
Pollution prevention reporting streamlined across all industries.
Legal liability now handled by national laws, not EU-wide rules.
Green Asset Ratio (GAR) changes for banks. Banks can exclude exposures related to companies below the 1,000 employee CSRD threshold, preventing unnecessary reporting obligations.

Corporate Sustainability Due Diligence Directive (CSDDD)

CSDDD is a mandate for businesses to monitor their supply chains for ESG risks. What will change?

Due diligence requirements now apply only to direct business partners. Companies are no longer required to conduct in-depth assessments of indirect suppliers unless they have evidence of ESG risks.
ESG impact reviews will now be required every five years instead of annually, although companies can still conduct bespoke assessments when necessary.
A revised compliance date – now July 2028 rather than July 2027. Guidelines will also be published by July 2026 to give companies more time to prepare.
SMEs to be protected from excessive data requests. Larger corporations cannot demand unlimited ESG data from small suppliers and reporting obligations for SMEs will now be capped.

EU Taxonomy

The EU Taxonomy is a green classification system that translates the EU’s climate and environmental objectives into criteria for specific economic activities for investment purposes. What will change?

Limit the reporting requirements to apply only to in-scope undertakings where they also have a turnover of over €450 million. For all other in-scope undertakings, Taxonomy reporting would be on a voluntary basis only.
Simplification of EU Taxonomy reporting. A 70% reduction in reporting templates and introduction of a financial materiality threshold to focus reporting on significant business areas.

Carbon Border Adjustment Mechanism (CBAM)

CBAM aims to ensure equal treatment of domestic and imported goods by applying a charge to carbon emitted during the production of imported carbon-intensive goods, such as aluminium, cement, iron, and steel. Its aim is to prevent carbon leakage and protect EU industries from high-emission imports. EU-based businesses importing carbon-intensive goods into the European Union, or selling to businesses within the EU, have to report their carbon data to avoid fines and become non-competitive. What will change?

90% of importers now exempt from CBAM compliance. A new 50-tonne threshold exempts small importers, benefiting 90% of businesses from CBAM reporting, while still covering 99% of total emissions.
Streamlined compliance for companies still in scope with easier emissions calculations and simplified reporting requirements.
Faster authorization for CBAM declarants.
Tighter fraud prevention rules.

What should your business do now?

The proposed Omnibus changes highlight the EU’s balancing act between sustainability goals and economic growth. The regulations will undergo an approval process and so despite ongoing uncertainty, UK businesses already in the scope of existing EU ESG regulations should continue with sustainability reporting and compliance efforts. This applies whether impacted directly, or indirectly through being part of a supply chain.

Whilst influenced by regulations, the ESG agenda is driven by consumers, investors, and major corporate stakeholders. These groups recognise that transparent and credible ESG data and disclosure are essential to understanding an organisation’s business strategy, purpose, and direction. Whether your business is affected by existing or proposed changes to the EU regulations, implementing best practices, such as a Double Materiality Assessment, will enhance your reputation, reduce risk, and increase investment attractiveness.