Introduction: The ESG Landscape in Flux

In today’s rapidly shifting regulatory landscape, companies are struggling to keep up with the complexities of ESG (Environmental, Social, and Governance) regulations. The European Union’s Omnibus Proposal, which introduces significant revisions to the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and EU Taxonomy Regulation, has further complicated the compliance landscape. As a result, businesses are now faced with a pressing question: How should we navigate ESG (de-)regulations in today’s world?

There is no single answer to where ESG stands today for every company. While it is undeniably at a crossroads, navigating these changes requires a tailored approach rather than a one-size-fits-all solution. ESG compliance and strategy must be assessed case by case, company by company, considering factors such as industry, market position, stakeholder expectations and long-term sustainability goals.

Given this, the key to successfully adapting to ESG (de-)regulations lies in striking the right balance—understanding the interplay between deregulation, simplification, and remaining obligations while ensuring these shifts are translated into practical, strategic actions.

But what does meaningful action and preparation look like in this evolving regulatory framework? And how can companies navigate the uncertainties ahead with confidence?

In this outline, we will provide updates on the EU Commission's Omnibus Proposal while identifying key action points, your company's position, and the current state of ESG - placing these developments in a broader perspective and tailoring them to you. 

Action vs. preparation – A dilemma

For many companies, the first challenge is understanding what needs to be done. The Omnibus directive introduces significant changes—from redefining the scope of CSRD and CSDDD to easing reporting burdens—but with these changes come critical questions: What happens if you don’t act? What are the risks of inaction?

Preparation, in this context, is not a passive waiting game for regulatory clarity—it is an active process. It means gathering information, consulting experts, and adopting best practices. Preparation is action. It involves fostering internal awareness, analyzing the implications of new regulations, and defining a strategic path forward.

Companies should start reassessment of their scope under CSRD, CSDDD, and the EU Taxonomy based on the proposal to determine whether they remain directly affected once the proposed changes take effect.

  • If they remain within scope, uncertainty is reduced, and the focus shifts to adapting to simplified reporting requirements. The key question then becomes:
    What ESG efforts have been implemented so far, and how does the company’s current compliance position compare to both the existing CSRD framework and the proposed Omnibus adjustments?
  • If a company is currently within scope but may fall outside it under Omnibus, the situation is less clear-cut. They must evaluate the impact of potential deregulation and consider whether voluntary ESG reporting or alignment with sustainability best practices still offers strategic value despite the reduced regulatory pressure. On the other hand, they must also consider that this remains a proposal, while the existing requirements are still in effect.

What does action look like? In the time of uncertainty, It starts with dialogue. As advisers, our role goes beyond providing information—we aim to foster meaningful conversations that help companies understand what needs to be done today and how to prepare for tomorrow.

The Intrinsic Motivation – Where Do You Stand as a Company?

The EU’s Omnibus Package aims to narrow down the applicability and simplify certain ESG regulations, including the CSRD, CSDDD, EU Taxonomy, and then CBAM. 

However, sector-specific commodity- and activity-based ESG regulations, such as the Battery Regulation, EU Ecodesign Regulation, Deforestation Regulation, Conflict Minerals Regulation, and Forced Labour Regulation, remain outside the scope of the Omnibus Package. Companies engaged in in-scope activities or trading in regulated materials must continue to comply with these frameworks, highlighting that a company’s industry and activities play a critical role in determining its ESG obligations.

A key trend within the Omnibus Package is the move toward greater regulatory flexibility. While simplifications and higher applicability thresholds ease compliance burdens, the European Commission is also proposing certain “awards” for companies that continue their ESG efforts, particularly in decarbonization-related initiatives.

Beyond compliance, ESG also ties into financial opportunities. The Sustainable Finance Framework facilitates easier access to green credits, funds, and investment opportunities for businesses committed to ESG principles. Additionally, some companies leverage ESG as a competitive advantage, attracting customers who prioritize sustainability, even without regulatory mandates.

Ultimately, where ESG stands today varies by company, depending on factors such as size, sector, products, activities, regulatory exposure, companies’ own policies, and market positioning.

Given the evolving nature of ESG regulations and the changes introduced by the Omnibus Package, companies find themselves in different positions regarding compliance. Some are directly affected and must take immediate action, while others face uncertainty or approach ESG voluntarily as part of their corporate strategy. The Omnibus directive adds further complexity by adjusting thresholds and simplifying requirements, increasing the diversity of companies' ESG obligations.

Where do you stand as a company? Understanding your position is the first step towards effective action and preparation.

Not all businesses engage with ESG solely due to regulatory mandates—many integrate sustainability into their strategy by choice. There are companies that only feel the need to comply with ESG regulations if required by law or contractual obligations (e.g., supply chain requirements from partners). Their ESG approach is reactive, focused on meeting minimum legal expectations rather than leveraging ESG as a competitive advantage. In addition, there are companies that go beyond compliance, proactively embedding ESG into their corporate identity. Their motivation is intrinsic, often driven by long-term sustainability goals, investor relations, brand positioning, or consumer expectations.

To navigate this landscape effectively, businesses can be categorized into different company classes based on their regulatory exposure, intrinsic motivation, and strategic approach to ESG compliance:

•    Companies Under Direct Regulatory Obligation

These companies fall squarely within the scope of ESG regulations, meaning compliance is not optional—it is a legal requirement. Whether due to their size, turnover, industry, or operations, they are directly subject to frameworks such as CSRD, CSDDD, the EU Taxonomy, or sector-specific ESG regulations (e.g., Battery Regulation, Deforestation Regulation, Forced Labour Regulation). For these companies, the priority is immediate action:

  • Ensuring full compliance with reporting and due diligence obligations.
  • Implementing internal policies and systems to meet regulatory standards.
  • Engaging with auditors and regulators to verify compliance readiness.

The Omnibus changes may alter their reporting obligations, but the core requirement to comply remains unchanged. These businesses must assess how the simplifications impact their existing compliance strategy and make necessary adjustments.

•    Companies in a State of Regulatory Uncertainty

This group consists of companies currently under ESG regulations but facing uncertainty due to changing thresholds and scope modifications introduced by Omnibus. Some businesses may find themselves moving out of scope if the new criteria (e.g., increased employee count or turnover thresholds) are adopted. For these companies, preparation is critical, as their future regulatory obligations remain unclear. Their key challenges include:

  • Monitoring legislative developments to determine their final classification.
  • Evaluating whether voluntary compliance remains beneficial even if deregulated.
  • Understanding potential market pressures, investor expectations, and reputational risks linked to ESG commitments.

While these companies might not be legally required to comply with ESG regulations if Omnibus passes, ESG remains a strategic consideration due to financial and stakeholder-driven expectations.

The Omnibus Effect – Content of the Omnibus Proposal: Simplification or Deregulation

An important question in this discussion, is whether the new EU approach is all about deregulation or simplification? The answer most likely lies in the balance. While some requirements have been relaxed, others have been clarified and streamlined. For companies, the key is to understand how these changes affect them and to act accordingly. Companies need to distil the relevant insights from the data and use them to inform their actions. In this regard, we provide a summary of main changes proposed by the Omnibus Package, which has been published by the Commission on February 26, 2025. It should be noted that the Package is in the “phase” of proposal, requiring EU Parliament’s and Council’s adoption to take effect:

•    Key Changes for CSRD 

Large Companies & Publicly Listed SMEs

Key Impact: The threshold for mandatory sustainability reporting has been changed, meaning that only the largest corporations—those with more than 1,000 employees and either 50 million revenue or 25 million assets—will be required to comply.

  • Currently, the CSRD applies to all large companies (defined as companies above two out of the three following thresholds: €50 million net turnover, €25 million balance sheet total, 250 employees), as well as SMEs whose securities are listed on an EU regulated market. Proposal will reduce the current scope of the CSRD to large companies with more than 1000 employees (i.e. companies that have more than 1000 employees and either a turnover above EUR 50 million or a balance sheet above EUR 25 million).
  • SMEs with securities on EU-regulated markets will no longer be required to publish sustainability reports, completely exempting them from CSRD obligations.
  • Businesses below the proposed thresholds will need to carefully assess their position and potential reporting obligations. On the other hand, these companies (companies with up to 1,000 employees) may choose to report voluntarily on the basis of a simplified voluntary standard to be adopted by the Commission.

Implementation Delay

Key Impact: The European Commission will make a separate proposal to delay the reporting requirements by two years for large undertakings according to the current CSRD framework and the listed SMEs. 

  • Large undertakings that meet the current threshold (excluding public interest entities such as banks and credit institutions), along with listed SMEs and small credit institutions, will have their reporting requirements postponed by two years.
  • In other words, this will postpone the application of all reporting requirements in the CSRD for companies that are due to report in 2026 and 2027.
  • As it is a separate proposal, it can be expected that the implementation delay will complete legislative procedure much quicker. The Commission invited co-legislators to reach rapid agreement on that postponement, in particular to provide the necessary legal clarity for
  • According to the Commission, without this delay, these companies would be required to report for only one or two years before potentially being exempt from the requirement, leading to unnecessary effort and costs.
  • This adjustment provides more certainty for affected businesses, allowing them to plan for compliance only if and when it becomes a long-term requirement.

Non-EU Companies with Significant EU Operations

Key Impact: Non-EU multinational companies that generate revenue in the EU will face higher reporting thresholds, meaning fewer companies will be subject to CSRD.

  • The proposal raises the net turnover threshold in the EU for non-EU companies from EUR 150 million to EUR 450 million.
  • In addition to the general turn-over thresholds, for eligibility, non-EU undertakings should also meet one of the adjusted size criteria for subsidiaries and branches:
  • Subsidiaries must meet the definition of a large undertaking under EU law.
  • Branches must generate at least EUR 50 million in net turnover (up from EUR 40 million) to align with large undertaking thresholds.

Value Chain Reporting

Key Impact: The requirements for collecting and verifying sustainability data across the value chain will become more flexible and less resource-intensive.

  • Companies will no longer be required to obtain sustainability data from suppliers and partners who are not legally obligated to report. Therefore,
  • However, voluntary data collection will be encouraged, particularly for businesses that wish to maintain high ESG standards.
  • Therefore, the value-chain cap will apply directly to the other reporting companies. It would protect all undertakings with up to 1000 employees. The cap will be defined by the voluntary standard adopted by the Commission as a delegated act. This means that large companies will have less ability to pass down extensive data requirements to non-reporting companies in their supply chains. 

Reporting Standards (ESRS)

Key Impact: The structure and presentation of ESRS will be simplified, interoperability with global standards will be further enhanced.

  • The European Commission plans to quickly revise the first set of European Sustainability Reporting Standards (ESRS) through a delegated act, aiming to adopt it within six months of this proposal’s entry into force.
  • The revision will reduce reporting burdens by removing less important data points, prioritizing quantitative over narrative information, and better distinguishing mandatory vs. voluntary disclosures.

Assurance Requirements

Key Impact: The planned “reasonable assurance” requirement for 2028 will be removed, ensuring companies do not face high audit costs. Limited assurance remains, but guidelines will be provided to clarify expectations before final standards are implemented.

Sector-Specific Reporting Standards & New Voluntary Frameworks

Key Impact:  The removal of sector-specific sustainability reporting standards will simplify compliance for companies that operate in industries with complex ESG factors.

•    Key Changes for CSDDD 

  • Narrower Supply Chain Due Diligence: Companies would only need to assess and address ESG risks within their tier 1 (direct) suppliers, unless there are cases of circumvention or when there is information pointing to likely or actual adverse impacts further down the supply chain. This removes the obligation to monitor indirect suppliers unless a heightened risk is identified.
  • Less Frequent Supplier Monitoring: The frequency of mandatory supplier assessments would be reduced from annual checks to once every five years, easing the compliance workload for businesses.
  • Implementation Delay: The first group of companies required to comply with the CSDDD would have until July 26, 2028— a-year delay proposed to allow businesses more time to align with best practices before the rules take effect. Like CSRD, implementation delay will be also made in a separate proposal to make the legislative process quicker for this part.
  • Limited trickle-down effect: In-scope companies will have limited ability to demand sustainability-related information from their SME and small midcap suppliers or business partners (companies with 500 or fewer employees). They can only request information that is already specified in the CSRD voluntary sustainability reporting standards (VSME standard). However, there is an exception: if an in-scope entity needs additional data to assess sustainability impacts (e.g., impacts not covered by the VSME standard) and there is no other reasonable way to obtain it, they may still request that information.
  • Limited  EU-Wide Liability Rules: The proposal limits the current EU-wide corporate liability framework, shifting responsibility for enforcement to national laws. This change is intended to reduce litigation risks for businesses and create a more flexible legal environment across member states.
  • Narrower Definition of “Stakeholders”: The proposal limits the scope of stakeholder considerations, reducing the number of individuals and communities that companies must assess when conducting due diligence.

•    Key Changes for EU Taxonomy

  • Introduction of “Opt-in” regime: The companies under the scope of EU Taxonomy reporting is no longer directly aligned with CSRD, as it was before. Companies with more than 1000 employees and a net turnover exceeding EUR 450 million are required to report their EU Taxonomy alignment. Those below this threshold can opt-in to report on EU Taxonomy and CapEx reporting if they choose. Therefore, companies below the threshold are not penalized for not reporting on EU Taxonomy.
  • Additional reporting flexibility: Additionally, the Omnibus package presents the option of reporting on activities that are partially aligned with the EU Taxonomy, fostering a gradual environmental transition of activities over time. This aligns with the aim to scale up transition finance and support companies on their path towards sustainability.
  • Announced simplifications:
    • Introducing a financial materiality threshold for Taxonomy reporting and reduce the reporting templates by approximately 70%.
    • Simplifying the most complex "Do No Significant Harm" (DNSH) criteria for pollution prevention and control related to the use and presence of chemicals, applicable across all economic sectors under the EU Taxonomy. This is the first step in revising and simplifying all DNSH criteria.

The Path Forward – Dialogue, Awareness, and Strategic Action

ESG regulations are shifting—but one thing remains constant: inaction is not an option. Companies that fail to respond risk legal exposure, reputational setbacks, and lost strategic opportunities. But for those who actively engage, the evolving ESG landscape presents a chance to turn compliance into competitive advantage.

The Omnibus revisions bring both simplifications and uncertainties. With reporting thresholds rising and due diligence obligations easing, some companies will find themselves with fewer regulatory burdens. Others may still be in scope but must rethink their compliance strategies to align with the new framework. Regardless of where a company stands, the challenge is the same: How do you prepare for what comes next?

This is where dialogue becomes critical. ESG compliance is no longer just about ticking boxes—it’s about understanding the implications, identifying risks, and positioning sustainability as a strategic driver. Companies that engage proactively will not only avoid pitfalls but also unlock new opportunities in financing, stakeholder trust, and long-term resilience.

What if you do not act? The risks are clear: legal penalties, reputational damage, and missed opportunities. But the rewards for those who act are equally clear: enhanced reputation, strategic advantage, and long-term sustainability.

The journey towards ESG compliance is not a one-time event but a continuous process. It requires action, preparation, and a clear understanding of where your company stands. The Omnibus proposal has brought both challenges and opportunities, and companies must navigate this landscape with care.

In the end, the key to success lies in finding the right balance between understanding what needs to be done today and preparing for tomorrow. It’s about turning information into knowledge, engaging in meaningful dialogue, and taking strategic action. Only then can companies truly thrive in the world of ESG (de-)regulation.

As the dust settles on the Omnibus, one thing is clear: the world of ESG regulations is evolving, and companies must evolve with it. The directive has set the stage for a new era of sustainability reporting and due diligence, and those who embrace this change will be the ones who lead the way. The question is no longer “if” companies should act, but “how”. And the answer lies in action, preparation, and the relentless pursuit of knowledge. 

So, where does your company stand? Please do not hesitate to reach out to us.