February 24, 2025
EU Omnibus Package 1 (Part 1) Simplification of Sustainability Reporting
The European Commission has launched the "Competitiveness Compass," a strategic framework aimed at promoting innovation, decarbonization, and economic security. This initiative seeks to close Europe’s productivity gap and position the EU as a global leader in future technologies and sustainable industries. A key factor in achieving this is the reduction of regulations and administrative burdens through major simplifications, driven by so-called Omnibus Regulations. The first of these, the Sustainability Omnibus Package, aims to simplify sustainability reporting (CSRD), corporate due diligence obligations (CSDDD), and the EU Taxonomy (Article 8). These measures are designed to help companies comply with requirements more easily while improving transparency and accountability.
The details of the Sustainability Omnibus Package will be presented by the European Commission on February 26, 2025. We will provide further updates as part of Part 2 of this article. In Part 1, we summarize the essential background information currently available.
Strengthening Competitiveness
On January 29, 2025, the European Commission officially introduced its strategy paper, "A Competitiveness Compass for the EU." Building on the Letta Report (April 2024) on the future of the internal market and the Draghi Report (September 2024) on EU competitiveness, the Commission is shifting its focus towards key areas crucial for the EU’s future prosperity and competitiveness.
These priority areas include:
Innovation
Decarbonization
Security
Regulatory simplification and the removal of internal market barriers
As part of the Budapest Declaration of November 2024, EU heads of state and government announced an "Omnibus Simplification Package". The strategy paper provides further details on its expected content, particularly regarding sustainability-related transparency and due diligence obligations. The Commission plans to align sustainability reporting requirements more closely with investor needs and scale obligations according to company size.
A new category of companies, "small mid-caps," is expected to be introduced, with tiered transparency requirements. Additionally, the Commission proposes a 25% reduction in reporting obligations overall, with an even greater 35% reduction for SMEs.
The EU Competitiveness Compass at a Glance
The EU Competitiveness Compass is a comprehensive plan focusing on three main areas:
1: Innovation: Support for technology companies, AI development, and advanced materials
2. Decarbonization: Ensuring affordable clean energy and strengthening industrial competitiveness
3. Security & Supply Chains: Expanding trade partnerships and reducing dependencies
To enhance economic resilience and competitiveness, the EU plans to introduce Omnibus Regulations.
Omnibus Package 1
The first Sustainability Omnibus Package aims to simplify and improve sustainability reporting in the EU. Its key implications include:
1. Reduction of Reporting Obligations: The Omnibus Regulation seeks to reduce the number of required data points by at least 25%.
This will be achieved by consolidating existing regulations, including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy Regulation.
2. Reduction of Bureaucracy: By streamlining reporting obligations, the regulation aims to ease administrative burdens, particularly for small and medium-sized enterprises (SMEs). This is expected to enhance the competitiveness of the European economy.
3. Clarity and Consistency: The simplification process will help eliminate redundancies and overlapping requirements, leading to clearer and more consistent expectations for businesses.
4. Preserving Content Requirements: While reporting obligations will be simplified, the core requirements of existing directives and regulations will remain intact. This ensures that fundamental sustainability reporting standards continue to apply in a more accessible format.
Timeline and Implementation of Omnibus Package 1:
- Introduction & Implementation: The Omnibus Package will be presented on February 26, 2025. From that point onward, companies will be informed about the official changes and simplifications in CSRD requirements.
- Transition Periods: Transition periods will likely be introduced, allowing businesses several months to a year to adjust to the new requirements.
- Reduced Reporting Obligations: Companies could already benefit from simplified reporting in 2025 once the new regulations come into effect.
The "Small Mid-Cap" Category
The proposed small mid-cap category under the Omnibus Regulation will apply to companies that are "larger than SMEs but smaller than large enterprises." These so-called mid-caps will benefit from regulatory simplifications, similar to SMEs.
The goal is to reduce reporting obligations by:
25% for all companies
35% for SMEs
Expected thresholds for the small mid-cap category will likely be introduced in Omnibus Package 1.
Companies in the EU are categorized by size, which determines their eligibility for various financial and support programs. The most common classifications are:
Micro-enterprises: Fewer than 10 employees and either an annual turnover or balance sheet total of up to €2 million. Small enterprises: 10–49 employees and either an annual turnover or balance sheet total of up to €10 million.
Medium-sized enterprises: 50–249 employees and either an annual turnover of up to €50 million or a balance sheet total of up to €43 million.
Large enterprises: 250+ employees.
The new small mid-cap category will likely be placed between medium-sized enterprises and large enterprises.
Sources:
European Commission President Ursula von der Leyen on the EU
Competitiveness Compass
EU Compass to Regain Competitiveness
Factsheet - Competitiveness Compass.pdf
Industry Perspectives & Recommendations
Industry associations and large corporations, which have long been engaged in sustainability regulations, have put forward recommendations for improving sustainability reporting. For example, the German Accounting Standards Committee (DRSC) suggests:
Introducing tiered CSRD requirements for mid-cap companies
Aligning thresholds with CSDDD applicability
Allowing voluntary compliance for smaller large companies
Reducing bureaucratic burdens in ESRS Set 1
Pausing CSRD sectoral standards development to review regulatory approaches
Ensuring planning security as a guiding principle for Omnibus regulation
Companies call for simplifications of existing reporting standards, with a focus on stakeholder-relevant information, sector-specific guidelines, and key performance indicators.
Experts are also discussing whether the ESRS for listed SMEs (LSME) could be suitable for the new small mid-cap category.
Exploring the Potential of Digital Reporting Platforms
Are you concerned about the EU Competitiveness Compass and Omnibus Package 1? Are you wondering how to manage rapid regulatory changes in your reporting project?
Specialized digital reporting platforms like ns.publish and ns.wow can provide security, simplification, and efficiency.
Our experts, Olivier Neidhart and Daniel Schön, are happy to answer your questions.