The European Union had established itself as the world leader in sustainability regulation, with an ambitious framework structured around the CSRD, the CSDD and the Green Taxonomy. Although demanding, this regulatory base was gradually being integrated by companies, with a veritable ecosystem being built around the collection, verification and reporting of ESG data.

However, the Omnibus I and II packages, adopted or under discussion in 2025, mark a political turning point: under the guise of simplification and administrative streamlining, they reflect a strategic retreat that undermines the coherence and legibility of the European framework.

By shifting deadlines, restricting the scope of application and diluting certain key requirements, the EU is disrupting the gradual installation of standards and sending a signal of regulatory instability to economic and financial players.

This note offers a critical summary of current developments, and the issues to be monitored until the end of the year.

What’s happened so far:

1. The Omnibus package’s stated objectives

On February 25, 2025, the Commission published a set of proposals aimed at :

• Simplify sustainability rules, boost competitiveness and free up additional investment
• Reduce the scope of the CSRD to only the largest companies, estimating that this represents an exclusion of around 80% of companies previously covered.
• Postpone by two years (until 2028) sustainability reporting obligations for companies concerned in 2026-2027
• Make Taxonomy reporting voluntary for out-of-scope companies, while offering flexibility for large groups
• Adaptation of the Green Asset Ratio (GAR) indicator to exclude companies not included in the scope of the CSRD
• Simplify due diligence obligations (CSDDD) to lighten the administrative burden.

– > Target: estimated annual savings of €6.3 billion and stimulation of an additional €50 billion in public and private investment.

(European Commission)

2. Omnibus I – “Stop–the–Clock “ (deferral of obligations)

On April 14, 2025, the European Union formally adopted theStop-the-Clock Directive as part of the Omnibus I legislative package. It came into force on publication in the Official Journal of the EU, and member states have until December 31, 2025 to transpose it into national law.

This initiative postpones certain deadlines:

For the CSRD (Corporate Sustainability Reporting Directive) :

• Wave 1 (large public interest entities with >500 employees): no deferral. These companies must still publish their reports for fiscal 2024 in 2025.
• Wave 2 (other large companies): two-year postponement, reporting now scheduled for 2028 for fiscal 2027
• Wave 3 (listed SMEs, small financial entities): also postponed by two years, with reporting in 2029 for fiscal 2028
• Wave 4 (non-EU companies with activities in the EU): no postponement; obligations remain for 2029 (fiscal year 2028)

For CSDDD (Corporate Sustainability Due Diligence Directive) :

• One-year postponement: Member States have until July 26, 2027 to transpose the directive, and the companies concerned begin to apply the obligations from July 26, 2028.

– > Objective: The aim of the directive is to prevent companies from embarking on compliance efforts – particularly for CSRD – when the final arrangements could still evolve as part of the ongoing negotiations on the substantial package (Omnibus II).

3. Omnibus II – Simplification of rules

On February 26, 2025, the European Commission unveiled the Omnibus II package, aimed at simplifying several sustainability instruments, including the CSRD, the CSDDD, the European Taxonomy, as well as the CBAM (carbon mechanism).

– > Objectives: Reduce complexity, cut compliance costs (estimated reduction of 25% for large companies, up to 35% for SMEs) and free up room for maneuver to boost competitiveness and investment. (Reuters)

For Taxonomy :

• Possible introduction of “voluntary” declarations and flexibility (partial reporting) for sub-threshold companies (Normative 6)

For CSRD :

• Simplification of ESRS standards (less data, clarification, elimination of sector-specific standards).
• Reducing the scope of the value chain: reporting only with direct suppliers of significant size.
• Restriction of scope to large companies (over 1,000 employees). (Reuters)

For CSDDD:

• Simplification and postponement by one year (implementation around 2028); easing of supply chain obligations. (Reuters)

For CBAM:

• Simplification and streamlining of reporting rules: extension of derogations (e.g. imports of less than 50 t), postponement of timetable, inclusion of external carbon prices. . (Reuters)

->State of play legislative :

• The Omnibus II package now enters a legislative process involving the European Parliament, the EU Council and the Commission. (Normative, Morrison Foerster)
• Parliament’s rapporteur has proposed an even higher uniform threshold (3,000 employees and €450m sales) for all ESG directives concerned (Gibson Dunn).

The Omnibus II package, behind a logic of simplification, marks a clear “voluntary” and restrictive turn:

• Weakening of the regulatory perimeter: by drastically reducing the entities concerned, the structural scope of the sustainability framework is set back from its original ambition. The Financial Times warns that this could damage investors and financial resilience (Financial Times).
• Risk of disguised deregulation: what is presented as “administrative relief” is perceived by several players as a regulatory step backwards, especially in the context of the Green Deal (Reuters, Financial Times).

Omnibus II represents a critical step in the deregulation of European ESG standards, lightening the regulatory burden but at a potentially high cost in terms of transparency, uniformity and accountability. The forthcoming legislative debates will be decisive for the future trajectory of sustainable reporting in the EU.

4. Council position – June 232025

On June 23, 2025, the Council of the European Union officially adopted its negotiating position (mandate) on the Omnibus II package, including CSRD and CSDDD (Consilium, Loyens & Loeff).

This position will serve as the basis for trialogue negotiations with the Parliament and the Commission:

For CSRD:

• Reinforced thresholds: only very large companies would be concerned: those with more than 1,000 employees and net sales of over €450 million.
• Exclusions: listed SMEs are removed from the scope. Member States may also exempt public interest entities with between 500 and 1,000 employees until the end of 2026.
• Assurance: the requirement for “reasonable assurance” has been removed. Only limited assurance will be required, with possible guidelines to follow.
• Voluntary standards: mandatory sector standards are withdrawn; the Commission may publish voluntary standards adapted to the size and capabilities of companies. (Loyens & Loeff, Consilium)

For CSDDD :

• Thresholds revised upwards: this applies only to companies with over 5,000 employees and sales in excess of €1.5 billion
• Risk-based approach: diligence focuses on operations, subsidiaries and direct partners (Tier 1); exhaustive mapping of the value chain is no longer required
• More flexible transition plans: much lighter description of actions planned/taken.
• “Objective and verifiable information”: the duty of care only applies when credible and verifiable information (studies, NGO reports, etc.) on potential impacts is available.
• Transition plans: implementation of climate plans is no longer compulsory; only planned and committed actions need to be declared
• Civil liability: the harmonized civil liability regime is abolished, giving way to national rules, with restricted access to class actions.
• Postponement of transposition: the deadline for transposition in member states is postponed by one year, to July 26, 2028. (Loyens & Loeff)

-> Issues and consequences :

The Council’s mandate marks a shift towards lighter, more restricted regulation:

• Weaker scope: Only very large companies will remain within the scope, thus weakening the initial universality and ambition of the European ESG framework.
• Fragmented ESG data: Restrictions on scope and reporting obligations are likely to hamper data collection and comparability, while reducing their usefulness to investors.
• Mitigated due diligence: Repositioning towards a lighter approach (Tier 1 only, no full mapping) can leave significant impacts off the regulatory radar, particularly in external supplier chains.
• Diluted liability: Withdrawal from the harmonized civil regime and class actions weakens access to justice and corporate accountability.
• Loss of momentum: Postponing the timetable and making obligations more flexible reduces the pace and urgency of transformation towards sustainability, and risks diluting the momentum for transition.

5. Intermediate legislative stages

On June 12, 2025, the European Parliament’s rapporteur on the Omnibus package presented a draft report proposing even more far-reaching amendments than those proposed by the Commission or the Council.

This preliminary draft has not yet been adopted, but it will serve as a basis for the final discussions in the JURI committee and the plenary session in October 2025. (Hogan Lovells, Gibson Dunn)

• Among other things, Parliament proposes :

– Removal of the requirement for climate transition plans: companies would no longer be required to formally adopt a transition plan, a measure that goes further than the Council’s proposals.

– Total exemption for subsidiaries if the parent company already publishes consolidated ESG data.

– Ban on gold-plating: Member States would not be able to reinforce national obligations beyond the European minimum.

The rapporteur’s draft illustrates a marked shift towards deregulation:

• Drastically reduced scope: the thresholds (3,000 employees, €450m sales) would exclude most of the companies previously targeted, weakening the universality of the ESG framework.
• Erasing transition obligations: abolishing transition plans weakens the momentum towards carbon neutrality.
• Limited responsibility: limiting due diligence to direct partners (Tier 1), and only in the presence of credible information, reduces the potential for detecting and acting on upstream risks.
• Compulsory uniformity at the risk of weakness: prohibiting national reinforcement (gold-plating) can limit regulatory innovation, but also prevent more robust frameworks in certain member states.

Vote expected in October 2025, followed by trilogues in November.

What to expect this fall–autumn and late 2025

Autumn 2025

• October 2025: The European Parliament should adopt its negotiating position in plenary, after a vote in the JURI Committee in the middle of the month.
• Late October – early November: This vote finalizes Parliament’s mandate for the forthcoming negotiations

Stop-the-clock will continue to apply during these debates.

Late 2025

• November 2025: The trilogues will be debated in trialogue and should get underway:
  • Negotiations between Commission, Council and Parliament on Omnibus II provisions (simplification, scope, requirements) and contested elements (transition plans, reasonable assurance, thresholds)
• Omnibus II amendments likely to be adopted (or finalized) before the end of the year.
• Legislative transposition :
  • CSRD (with new thresholds): to be incorporated into national legislation.
  • CSDDD: same deadline (mid-2027 for transposition, application in 2028).
• Possible publication by the Commission of guidelines (e.g. for limited insurance, opt-in taxonomy, targeted due diligence).

Transposition and implementation

• End 2025: Deadline for transposition of the Stop-the-Clock Directive (Omnibus I) in the Member States
• Mid-2026: Expected adoption of Omnibus II.
• 2026-2027: National transposition of the final provisions of the reform (CSRD, CSDDD, Taxonomy, CBAM, etc.).

In a nutshell:

Challenges and points of vigilance

The changes proposed via the omnibus package are explicitly presented as a means of streamlining and lightening the ESG framework, but they raise several fundamental criticisms:

• Transparency vs. competitiveness: Investors, NGOs and the ECB are concerned about the risk of excessive weakening of bonds: transparency deemed necessary for financial stability. (Financial Times)
• Human rights and the supply chain: Potential collapse of CSDDD could reduce corporate responsibility for indirect impacts. (Reuters)
• Erosion of uniformity and regulatory fairness: excluding 80% of companies from the scope weakens the global approach and deploys a fundamental inequality between players.
• Loss of momentum in the ESG transition : the postponement of obligations until 2028 risks slowing down the integration of best practices by companies and the development of internal reporting capabilities.
• Risk of regulatory instability: shifting deadlines and constantly adjusted criteria can discourage investors and complicate companies’ strategic planning.
• Reduced transparency and accountability: making Taxonomy reporting voluntary and easing due diligence requirements weakens the traceability of sustainable practices and the supervision of value chains.

The EU, once a pioneer of sustainable regulation, now seems to be buckling under the pressure of economic competitiveness.

The “omnibus 2025” package poses a fundamental problem:

• it calls into question the solidity of a framework in the process of being adopted, by making it partially optional and less binding.

This strategic retreat could not only undermine the confidence of stakeholders – investors, NGOs, citizens – but also dilute the structuring effect of ESG standards in the transition.

Sources

Europe plans to ease sustainability reporting rules to compete globally; https://www.reuters.com/world/europe/eu-set-propose-sweeping-red-tape-cuts-boost-business-competitiveness-2025-02-26/?utm_source=chatgpt.com

Directive (EU) 2025/794 of the European Parliament and of the Council of 14 April 2025 amending Directives (EU) 2022/2464 and (EU) 2024/1760 as regards the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements; https://eur-lex.europa.eu/eli/dir/2025/794/oj/eng

Omnibus II – COM(2025)84; https://commission.europa.eu/publications/omnibus-ii_en

Rowback on EU green rules will harm companies and investors; https://www.ft.com/content/5345c699-7b14-4354-860b-84a54250e01f

How Europe’s ambition to lead on corporate human rights ran into the sand; https://www.reuters.com/sustainability/boards-policy-regulation/how-europes-ambition-lead-corporate-human-rights-ran-into-sand-2025-07-21/

Commission simplifies EU sustainability and investment rules and cuts administrative burdens to the tune of over €6 billion; https://ec.europa.eu/commission/presscorner/detail/fr/ip_25_614

All you need to know about the omnibus law; https://www.novethic.fr/definition/loi-omnibus

The EU’s Proposed Omnibus Package-Sustainability Reporting Simplified ; https://www.velaw.com/insights/the-eus-proposed-omnibus-package-sustainability-reporting-simplified/

The Omnibus Simplification Package: explained: https: //normative.io/insight/the-omnibus-simplification-package-explained/

Simplification: Council agrees position on sustainability reporting and due diligence requirements to boost EU competitiveness ; https://www.consilium.europa.eu/en/press/press-releases/2025/06/23/simplification-council-agrees-position-on-sustainability-reporting-and-due-diligence-requirements-to-boost-eu-competitiveness/

Simplification: Council gives final green light on the ‘Stop-the-clock’ mechanism to boost EU competitiveness and provide legal certainty to businesses ; https://www.consilium.europa.eu/en/press/press-releases/2025/04/14/simplification-council-gives-final-green-light-on-the-stop-the-clock-mechanism-to-boost-eu-competitiveness-and-provide-legal-certainty-to-businesses/

ESG Omnibus update: Council adopts its final position on the second Omnibus regarding CSRD and CSDDD ; https://www.loyensloeff.com/insights/news–events/news/esg-omnibus-update-council-adopts-its-final-position-on-the-second-omnibus-regarding-csrd-and-csddd/

EU Omnibus Simplification Package Update; https://www.gibsondunn.com/eu-omnibus-simplification-package-european-parliament-rapporteur-proposes-further-cutbacks-to-sustainability-reporting/

EU Omnibus update – draft report published and EFRAG simplified ESRS exposure drafts; https://www.hoganlovells.com/en/publications/eu-omnibus-update-draft-report-published

How Europe’s ambition to lead on corporate human rights ran into the sand; https://www.reuters.com/sustainability/boards-policy-regulation/how-europes-ambition-lead-corporate-human-rights-ran-into-sand-2025-07-21/

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