Carmen Cojocaru
ESG Technical Director on the Kreston Global ESG Expert Network Committee
Christina Tsiarta
Head of Advisory Services on Sustainability, ESG & Climate Change at Kreston ITH, Kreston Global ESG Advisory Group Chair
The EU’s Omnibus Package on ESG: Current implications and future ambitions
October 15, 2025
The EU’s Omnibus Package on ESG signifies a strategic move to streamline the EU’s regulatory framework, reducing administrative burdens and boosting competitiveness at a critical time for sustainable growth. By aligning reform efforts with global trends and climate goals, the initiative aims to enhance investment, foster innovation, and position Europe as a leader in responsible markets. Its success could serve as a model for international standards, attracting foreign investment and shaping future global practices in green finance and sustainable development.
Why the European Commission proposed the Omnibus Package
The European Commission’s proposal of the Omnibus Package represents a strategic effort to streamline a complex regulatory landscape that has grown increasingly challenging for businesses, consumers, and policymakers alike. This initiative is driven by the need to address mounting administrative burdens, enhance the efficiency of EU regulations, and foster a more competitive environment conducive to sustainable growth.
Several motivations underpin this move. Firstly, the EU faces ongoing global competition, which necessitates regulatory agility to ensure European companies can innovate and scale without being hindered by excessive legislative red tape. According to the European Commission’s own commitment, they aim to reduce administrative burdens by at least 25%, and up to 35% for SMEs, to improve the business environment (European Commission, “Better regulation”).
Secondly, the evolving climate and sustainability agendas, exemplified by the European Green Deal, demand a more coherent and simplified framework to mobilize investments, improve compliance, and meet ambitious climate targets for 2030 and beyond. The Green Deal’s overarching goals are outlined in the European Commission’s strategy document.
Current market conditions further amplify the need for reform. Businesses are grappling with fragmented rules that often overlap and evolve rapidly, leading to increased costs, reduced transparency, and diminished agility. The European Court of Auditors highlighted that existing regulatory fragmentation hampers the effectiveness of sustainability policies, calling for streamlined and coherent EU legislation (“Special report 10/2018: Better regulation, more Effective Regulation” ).
Regulatory complexity also impacts international attractiveness, potentially discouraging foreign investment and limiting the EU’s ability to lead in global clean-tech and sustainable finance sectors. The European Investment Bank highlights that regulatory uncertainty can inhibit green investments, which are crucial for achieving climate goals.
The Relevance of the Omnibus Package: Who wins and who risks
Revisions under the Omnibus Package
The Omnibus Package proposes revisions to four key pieces of ESG-related legislation: the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the Carbon Border Adjustment Mechanism (CBAM) and the EU Taxonomy Regulation.
In regard to the CSRD, the Omnibus Package proposes a higher employee threshold for companies in scope. Under the proposed revisions, companies with over 1,000 employees and either a turnover of more than €50 million or a balance sheet of more than €25 million still need to report. The employee threshold was previously 250 employees. The turnover threshold is also being increased for non-EU parent companies, from over € 150 million to over € 450 million. The ESRS data points are being simplified, no sector-specific standards will be developed, and only limited assurance will be required (as opposed to limited and reasonable). Furthermore, according to the Stop-the-Clock proposal, which has been adopted by the European Commission, there is a postponement to reporting for large non-listed organisations and listed small- and medium-sized enterprises (SMEs) by two years (2025 to 2027 and 2026 to 2028).
For the CSDDD, the Omnibus Package proposes delays of one and two year(s) to the transposition and compliance deadlines, respectively, to 26th July 2027 and to 26th July 2028. Furthermore, the due diligence obligation will be limited to direct business partners only, and the requirement to terminate business relationships when severe potential or actual adverse impacts are identified is being removed. Review cycles are being increased to five years, and the EU-level civil liability is being removed, leaving it up to national regimes.
For the EU Taxonomy, the Omnibus Package proposes focusing the KPIs on the very large companies only, with over 1,000 employees and more than €450 million in turnover. The disclosures are also being made simpler and lighter, with streamlined templates and a de minimis exemption, whereby no reporting will be required on activities that comprise less than 10% of turnover. Financial institutions will also be able to defer detailed KPIs to 31st December 2027.
Potential wins
These revisions simplify the reporting, align the provisions of different regulations and reduce the bureaucracy involved, thereby reducing the cost, time and effort required by businesses in scope to comply. The Stop-the-Clock proposal also gives businesses in scope more time to prepare their reporting. 80% fewer firms are estimated to be out of scope with these revisions, thereby removing an administrative burden and related costs for many SMEs. Furthermore, the limited assurance requirement makes it easier for businesses to comply and simpler for regulators to review. Enforcement will also remain national, which requires fewer resources and time.
Potential risks
Less coverage in data points and reduced overall transparency in reporting mean that the amount of ESG data available will significantly decrease, so users of this data (e.g. consumers, regulators, clients, partners, investors, media, public, etc.) will face a higher risk of blind spots and harder cross-sector comparability, particularly for high-impact sectors. The risks of scrutiny also increase as transparency decreases. The proposed revisions have also created uncertainties for businesses and a lack of clarity for the market. The requirement for limited assurance only will potentially impact the quality of the data being reported and reduce the need for relevant assurance services, negatively impacting service providers. Furthermore, companies out of scope may still have to comply with ESG procurement questionnaires from their value chain, so these companies will still need to allocate resources to comply and may be less prepared to do so, or able to score highly. With enforcement remaining only national, there is also the risk of patchwork liability and conflicting standards across the EU. Given that legislation in other regions tends to follow the EU, these revisions may also lead to a domino effect of revisions to similar pieces of legislation in other geographical areas e.g. Asia-Pacific, North America, etc., with more significant global market implications.
EU and Global market implications of the Omnibus Package
The adoption of the Omnibus Package positions the EU at a pivotal juncture, aligning its regulatory approach with broader international trends while signalling a clear shift towards more pragmatic and business-friendly policies. On an EU level, this initiative supports the continent’s strategic commitments under the European Green Deal and its sustainability objectives for 2030.
By reducing administrative burdens and enhancing regulatory clarity, the EU aims to incentivise sustainable investment, support innovation, and maintain its competitiveness on the global stage. The European Commission’s “Sustainable finance in the EU” report highlights the importance of regulatory clarity for mobilising private investments in sustainable finance. Externally, the implications are equally significant. As global markets increasingly prioritise sustainability and responsible business practices, the EU’s efforts to streamline and enhance its regulatory framework could serve as a model for other regions. The OECD’s recent publication on “Global Coordinated Approaches to Sustainable Finance” underscores that regulatory convergence plays a crucial role in fostering international investment flows and shared standards.
Countries and trading partners that align their policies with sustainable development goals may view the EU’s reforms as a benchmark to follow, thus shaping international standards in the years to come. The European Central Bank has also stressed that regulatory stability and transparency are vital for fostering sustainable finance at the global level.
Furthermore, a more streamlined EU framework can positively influence global supply chains. The World Economic Forum emphasizes that regions leading in clean technology and governance standards tend to attract more foreign direct investment (FDI) and drive innovation (World Economic Forum, “Why integrated and regenerative leadership is vital for the future of global value chains”).
How the Omnibus Package supports future ambitions
The Omnibus Package does not change the EU’s legally binding 2030 target of reducing net greenhouse gas emissions by 55% compared to 1990, nor does it impact other key tools, such as the EU’s Emissions Trading System (ETS). The simplifications are intended to cut red tape and focus efforts on businesses with the biggest impact, in order to reduce costs and free up management capacity. The aim is to therefore to boost the competitiveness of all EU businesses, incentivise sustainable investment and support cross-sectoral innovation. The Package, therefore, remains in law.
However, the delays it introduces in reporting and the narrower scope of reporting and due diligence introduce execution and monitoring risks for successfully achieving the 2030 pathway. This is because the revisions send market signals that will make it harder to mobilise private finance and verify progress. The reduction in data being reported also means that the volume of decision-useful high-quality ESG data available will be significantly less, therefore providing weaker steering signals for boards, banks and supervisors. Furthermore, due to the reduced number of businesses in scope, fewer companies will be allocating capital, time and human resources to meeting the 2030 and Green Deal goals, at least in the short-term. There will also be negative impacts on risk assessment of climate threats and transition plans of businesses. So while the Omnibus Package maintains future ambitions, such as the EU’s 2030 goal, it complicates the roadmap to achieve that 2030 goal. But the goal is still attainable.
The Omnibus Package revisions also present a business opportunity for the mid-market, which is no longer in scope of these pieces of legislation. The management of ESG issues ceases to be a burdensome tick-box exercise for compliance for SMEs, but becomes a strategic imperative and business enabler. It is critical for market access and growth, as well as for the cost of capital and financing opportunities for companies.
According to the Global Trade Report published by Thomson Reuters for 2024, 81% of global respondents consider ESG criteria as important or very important when choosing suppliers[1]. The World Economic Forum noted that in 2024, according to a KPMG survey, 45% of M&A deals encountered a significant deal implication due to a material ESG due diligence finding, with more than half of these experiencing a ‘deal stopper’[2]. Unmanaged climate risks could also significantly impact global equity value and translate into a 27% loss, with the worst-performing firms losing up to 75% of their value, according to Cornell University[3].
The message is clear. If you remain in scope of these key pieces of ESG legislation, the road to compliance is now simpler and more straightforward for you. But if you’re no longer in scope, keep investing in climate-change transition plans; in high-quality ESG data for your strategies and reporting; and in supply chain due diligence on ESG, because the long-term competitiveness and resilience of your business depends on it.
[1] Thomson Reuters Institute, 2024 Global Trade Report, December 2024, https://www.thomsonreuters.com/en-us/posts/international-trade-and-supply-chain/supply-chain-resilience/
[2] World Economic Forum, Corporate Responsibility makes financial sense. Here’s why. March 2025, https://www.weforum.org/stories/2025/03/why-esg-is-now-a-financial-imperative/
[3] Cornell University, Quantifying firm-level risks from nature deterioration, April 2025, https://arxiv.org/abs/2501.14391
