Understand the EU’s sustainability Omnibus proposal: Key changes every ESG Manager must know

In March 2025, the European Commission unveiled the EU’s sustainability Omnibus proposal, a bold legislative overhaul intended to reshape how sustainability is regulated, reported and financed across the European Union. This landmark package is more than administrative fine-tuning: it’s a high-stakes recalibration of Europe’s entire sustainable finance framework, aimed at reducing complexity, enhancing business clarity, and keeping the EU on track as a global leader in green governance.

At its core, the proposal consolidates and revises five key pillars of the EU’s sustainability rulebook:

• CSRD (Corporate Sustainability Reporting Directive)
• CSDDD (Corporate Sustainability Due Diligence Directive)
• CBAM (Carbon Border Adjustment Mechanism)
• InvestEU, the EU’s flagship investment programme
• The EU Green Taxonomy, the classification system defining what counts as a “sustainable” economic activity.

Each of these laws plays a crucial role in the EU’s broader Green Deal objectives, and until now, they’ve been implemented in silos—leading to overlaps, administrative bottlenecks and fragmented compliance timelines. The Omnibus proposal aims to cut red tape, reduce compliance burdens and create a more integrated and globally competitive green economy, while still driving transparency and accountability in corporate environmental, social and governance (ESG) performance.

The proposal is a direct response to concerns from businesses—particularly SMEs and sustainability officers—who have voiced the need for more harmonised reporting standards and more time to adapt to evolving regulatory demands. By introducing simplified disclosure formats, phased implementation schedules, and streamlined alignment between different frameworks, the Commission aims to unlock greater coherence across the EU’s sustainability agenda.

In the words of the World Economic Forum, the Omnibus initiative “synchronises and simplifies EU sustainability regulations, giving companies a clearer roadmap for compliance and investment”. The move also signals Brussels’ determination to strengthen the EU’s capital markets union by encouraging investment into green industries, especially by making sustainable disclosures more accessible and less burdensome for smaller companies.

For ESG managers and sustainability consultants, this is not merely a technical update, it’s a two sided shift in the regulatory environment that governs how businesses measure, report, and manage their sustainability performance. Understanding the EU’s sustainability Omnibus proposal is crucial for ensuring compliance readiness, advising internal stakeholders or clients with authority, and staying one step ahead in a rapidly evolving ESG landscape. In this article, we break down what the proposal includes, which laws are being revised, the key changes companies need to watch out for, and what actions professionals should take right now.

Let’s take a closer look at the individual EU regulations and what is changing

The EU’s sustainability Omnibus proposal represents a significant effort to streamline the Union’s regulatory architecture by revising five cornerstone policies. But while the proposal is intended to reduce complexity and enhance legal clarity, it also raises pressing questions about whether efficiency is being prioritised at the expense of environmental ambition. Below, we take a closer look at each of the affected regulations: what’s changing, what it means, and where challenges may arise.
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CSRD - Corporate Sustainability Reporting Directive

The CSRD was originally designed to vastly expand the scope of sustainability reporting within the EU, requiring approximately 50,000 companies -up from just 11,000 under the previous NFRD - to publish detailed disclosures on environmental, social and governance (ESG) factors. The goal was clear: increase corporate transparency, strengthen investor confidence, and push sustainability from the periphery to the boardroom

Under the Omnibus proposal, however, some of these ambitions are being scaled back, at least temporarily. Key proposed changes include:

• Extended transitional deadlines for non-listed SMEs and non-EU companies.
• Streamlined audit and assurance requirements, particularly for the early years of implementation.
• Harmonisation of reporting with other instruments, including the EU Taxonomy and CSDDD.

This undoubtedly reduces short-term burdens for companies and gives them more breathing space to build up data systems and reporting capacity. However, critics argue that it could undermine the directive’s long-term impact.

In fact, German business association BNW warns that the Omnibus approach represents a “step backward” for sustainability and corporate responsibility. It argues that by easing requirements and stretching deadlines, the EU risks diluting the force of its green agenda and creating a fragmented reporting environment again. While ESG managers may welcome the regulatory relief, the concern is that it may reduce comparability and urgency, two pillars that CSRD was meant to reinforce.

CSDDD - Corporate Sustainability Due Diligence Directive

The CSDDD aims to establish binding obligations for companies to identify, prevent and mitigate human rights abuses and environmental harm across their value chains.The original directive included stringent expectations and wide applicability—especially for large corporations operating across borders. However, under the EU’s Omnibus package, the directive has been significantly revised, resulting in both relief and controversy.

Key Omnibus Amendments to the CSDDD:

• Higher company thresholds: Now, only companies with over 1,000 employees and €450 million in global turnover fall within scope. This is a sharp increase from the original 500 employees and €150 million turnover, drastically reducing the number of covered firms from around 16,000 to approximately 5,500.
• Sector-specific application: Instead of a blanket approach, the directive now focuses on high-risk sectors(e.g. textiles, agriculture, minerals), narrowing its reach to where environmental and human rights violations are most likely to occur.
• Modified liability framework: The civil liability provisions have been weakened, potentially limiting the legal consequences companies face for breaches—raising concern among human rights advocates.
• Extended compliance timeline: Companies now have more time to establish due diligence processes, with a phased timeline giving firms 3 to 5 years depending on their size and sector.

While the Omnibus version of the CSDDD is being hailed by some as a step toward regulatory pragmatism, especially for SMEs and international suppliers, it’s also facing backlash. Sustainability experts argue that these changes dilute the ambition of the directive and reduce its capacity to drive meaningful change. As the German Organisation Bundesverband Nachhaltige Wirtschaft put it, the Omnibus revisions represent "a setback for corporate responsibility" in Europe.

CBAM - Carbon Border Adjustment Mechanism

The CBAM is one of the EU’s most innovative tools to prevent carbon leakage by placing a carbon price on imports of high-emission goods like steel, aluminium, cement, and fertiliser. It effectively levels the playing field for European producers subject to the EU Emissions Trading System (ETS).

Changes under the Omnibus proposal include:

• Where non-EU producers cannot provide verified emissions data, default values can be used, giving importers more flexibility in the short term.
• Smaller operators and businesses in complex value chains will benefit from clearer guidance and streamlined reporting tools.
• The move to full financial compliance has been slowed, with the transitional reporting phase continuing into 2026, allowing more time for adjustment and system alignment.

This pragmatic shift may help ensure smoother implementation and avoid trade disputes, but it also means that the environmental effect of CBAM might take longer to materialise. Some climate policy observers see this as a calculated trade-off between regulatory realism and environmental urgency.

InvestEU

InvestEU is the EU’s flagship programme to leverage public and private investment in strategic sectors including sustainable infrastructure, green innovation, and social impact initiatives. Since its launch, InvestEU has faced criticism for bureaucratic hurdles that slowed down capital flows. The Omnibus proposal aims to:

• A new unified digital portal will simplify the application process, reducing red tape for businesses and public institutions alike.
• Project eligibility criteria will be more clearly mapped to the EU Taxonomy for Sustainable Activities, providing consistent standards for environmental sustainability assessments.
• The timeline for project evaluation and approval - especially for green and social impact investments - will be shortened to improve capital mobilisation.
• In a significant move, InvestEU will now be expected to align more directly with the Corporate Sustainability Reporting Directive (CSRD). This means funded projects must demonstrate compliance with the EU’s broader sustainability reporting obligations, including transparency on ESG metrics and double materiality assessments.

This is a clear win for project developers and ESG finance professionals who have long asked for more efficient access to capital. If executed well, it could unlock billions in green investment and make EU funding more accessible to innovative SMEs.

EU Green Taxonomy

The EU Green Taxonomy is the backbone of sustainable finance in the EU, a detailed classification system defining what counts as “environmentally sustainable.” It provides clarity to investors and regulators by establishing science-based thresholds for green activities.

The Omnibus proposal introduces some strategic recalibrations:

• Eased technical screening criteria, particularly for sectors like agriculture and manufacturing.
• More guidance for SMEs, reducing entry barriers for classification compliance.
•  Improved alignment with other regulations, especially CSRD and InvestEU, to create a more coherent sustainability framework.

While welcomed by smaller companies and investors seeking clarity, some experts caution that relaxing thresholds could water down the credibility of the Taxonomy, undermining its power to fight greenwashing.

Current regulation overview

Concerns, Controversies, and what to watch for

While many hail the Omnibus proposal as a pragmatic fix to the EU’s complex regulatory maze, not all stakeholders are convinced it’s a move in the right direction. For those who truly aim to understand the EU’s sustainability Omnibus proposal, it’s essential to look beyond the headlines and examine the risks lurking beneath the regulatory reform.

1. Risk of watering down sustainability ambition

One of the most vocal critiques is that the proposal could undermine the EU’s green leadership. The BNW (Bundesverband Nachhaltige Wirtschaft) has described the move as a step backward for corporate responsibility and the EU’s climate ambitions. The concern is that while businesses will benefit from simplified rules and delayed reporting deadlines, this relaxation may come at the cost of real climate progress and stakeholder accountability.

2. Legal and regulatory uncertainty

Since the Omnibus proposal is still under review by the European Parliament and Council, its final form remains uncertain. Businesses may hesitate to invest in new ESG reporting systems or risk management processes until the legislative text is fully adopted and clarified. This limbo could stall momentum, particularly for firms already struggling with overlapping timelines and complex guidance across CSRD, CSDDD, and CBAM.

3. Technical gaps and ambiguity

Though the proposal aims to harmonise sustainability laws, many technical details remain vague - from taxonomy alignment and CBAM emissions accounting to what “streamlined” assurance means in practice. ESG advisors, consultants and audit professionals continue to call for more granular guidance and a realistic roadmap for implementation, especially for SMEs and non-EU companies.

ESG Takeaway: The reforms are not yet law. As such, ESG managers must avoid assuming guaranteed relief or delays. Instead, they should prepare under existing rules, adapt with agility, and ensure their data and strategy are future-proof, regardless of legislative shifts.

What ESG managers & consultants should do now

For those who want to understand the EU’s sustainability Omnibus proposal and turn uncertainty into action, the following checklist provides a robust strategy to prepare for both the current and future regulatory landscape.

Strategic Checklist for ESG Leaders

1. Secure near-term compliance: Continue preparing CSRD, CSDDD, and CBAM-aligned reports as currently required. Do not pause internal readiness processes.

2. Conduct data gap analysis: Evaluate data systems to ensure future compatibility with revised taxonomy criteria, expanded CBAM scope, and ESG assurance requirements.

3. Monitor the legislative process: Track committee reviews and parliamentary votes. Assign internal resources or use advisory services to interpret ongoing updates.

4. Update stakeholder messaging: Develop proactive board and investor narratives that frame the Omnibus as both a business opportunity and a policy evolution.

5. Align project financing: Begin reshaping investment proposals and pipeline documents to match InvestEU’s revised application and taxonomy-aligned screening process.

6. Position as an ESG thought leader: Equip your internal teams and clients with advisory content, regulatory insight, and industry-specific guidance to stay ahead of competitors.

According to an article from Sustainability People Company, businesses that act now, not those that wait for regulatory clarity, will be the true market leaders under the new Omnibus framework.

‍Navigate the Omnibus with confidence

To truly understand the EU’s sustainability Omnibus proposal is to recognise it as a turning point. It could be seen as a rejection of the EU’s green vision as well as a reorganisation designed to future-proof it. By cutting redundant red tape and providing clarity across five cornerstone laws, the Omnibus aims to empower companies while still advancing sustainability.

But simplification does not mean simplicity. For ESG professionals, this is a moment that requires decisive action, robust data systems, and a resilient advisory strategy. Those who prepare early - integrating taxonomy thresholds, due diligence obligations, and CBAM compliance into a unified sustainability framework - will be best positioned to thrive.

Zuno Carbon is here to help you so you can demonstrate compliance with accuracy, transparency, and confidence.

Frequently Asked Questions (FAQs):

1. What is the goal of the EU Omnibus package?

The EU sustainability Omnibus proposal aims to streamline and harmonise the EU’s main sustainability regulations: CSRD, CSDDD, CBAM, InvestEU and the EU Taxonomy. Its goal is to reduce administrative burdens, align reporting frameworks, and ensure more efficient ESG compliance across the EU, all while sustaining the green transition.

2. What does the EU Omnibus package mean for businesses undertaking sustainability reporting?

It means simplified rules, longer lead times, and reduced duplication in ESG reporting obligations. However, businesses must continue to meet current requirements and should prepare for possible changes by building adaptable systems and closely tracking legislative developments.