What if the CEO asks me about… the EU's Omnibus Directive?

On 26 February 2025, the EU Commission published its proposed Omnibus Directive, aiming to simplify EU rules, boost competitiveness and reduce the perceived regulatory burden on businesses, particularly SMEs. Here, we break down the key takeaways for busy in-house teams and discuss what we can expect next from the EU Parliament and Council.

Whilst the Omnibus Directive was initially billed as a mere streamlining of existing sustainability legislation to reduce the "bureaucratic burden" without changing the content of the laws, what has emerged is much more substantive and far-reaching. If approved, the proposed Omnibus Directive will result in significant changes to key pieces of EU sustainability legislation, including both the CSRD and CSDDD: pushing back deadlines, significantly reducing the companies in scope (up to 80% in the case of the CSRD), paring back some of the reporting and due diligence requirements and reducing the penalties and civil liability provisions for non-compliance. For a summary of the key proposals skip to the bottom of the page.

The proposal will now go to the European Parliament and Council for consideration and potentially further changes…

For businesses, the Omnibus is the latest saga in the EU's now regular political flip-flopping on sustainability legislation more generally (as seen late last year with the last minute and heated debates on the EU's Deforestation Regulation). The upshot is more uncertainty for businesses, many of whom have been investing significant time and money getting ready to comply with the new obligations.

So what should businesses do: down tools or press ahead as planned? And what approach can we expect the EU Parliament and Council to take? Here, we break down the key considerations and takeaways for busy in-house teams.

Key takeaways and considerations

• A two-step approach: The Omnibus Directive proposals are split in two. The first is limited to the proposed delay to the CSRD and CSDDD, allowing this to be negotiated separately and speedily - the Commission has asked for these changes (if approved) to be transposed into national law by 31 December 2025 at the latest. The second would amend some of the substantive requirements and is expected to be far more contentious (as this week's debates in the European Parliament and Council have shown) and would likely take much longer - we might not get an answer on this until much later in the year. (The usual process takes 18 months but this is likely to be fast-tracked).
  
  
• Looking around corners, what approach can we expect the Parliament and Council to take? The first proposal to push back the deadlines for the CSRD and CSDD is less likely to be controversial across the political divides and we expect this to be agreed - even if it's not a full two-year extension (for CSRD), but one year instead. This would give businesses some certainty and enable the more substantive provisions to be negotiated. However, the second proposal on substantive changes to the CSRD and CSDDD themselves is likely to see much more political wrangling.
  
  
  • The EU Parliament: The Omnibus has already been hotly debated in the EU Parliament which is currently very divided. The European People's Party (which holds the most seats) and the right-wing parties all broadly support the Omnibus, and together they could push this through in the Parliament, potentially with even further changes. On the other hand, the Greens, S&D and the left-leaning parties have been vocal against any changes they perceive as 'deregulation' and cutting across the policy aims of the Green Deal – however they would need to work with the EPP on a compromise position. A consensus amongst the centre parties may be challenging.
    
    
  • The EU Council: It is currently unclear what position the European Council will take – whilst influential member states like Germany and France have indicated support for some of the proposed changes, a qualified majority of members states would be needed (15 of 27 member states) for any final decision. As witnessed with the EU Deforestation Regulation last year, the Council could reject any proposed changes by the Parliament if they think they stray too far from the original requirements of the legislation.
• Don’t down tools: Whilst some companies might be inclined to breathe a sigh of relief, that would be premature at this stage. The Omnibus proposal is just that, a proposal – as above, it is unclear what the final form of the Directive could look like and how long it will take to reach agreement on any changes. Therefore, businesses should not 'down tools' – for now the CSRD and CSDDD remain in force as originally enacted and businesses should cautiously continue to prepare whilst monitoring the developments from Europe closely.
  
  
• The underlying benefits have not changed: While the EU may be tying itself in knots debating the Omnibus proposal, the underlying commercial (and people/planet) benefits of this work have not changed. Double materiality assessments, sustainability reporting and supply chain due diligence remain key tools for driving both short-term business resilience and long-term commercial success. Together, they help businesses identify where they are exposed to ESG risks across their supply chains and the changes needed to business models, product design and supply chain arrangements to mitigate them. This not only helps minimise the risk of potential legal challenge, financial penalties and reputational damage, but also drives better supply chain efficiency and resilience. Even without the CSRD and CSDDD, this is good for business.