The EU Omnibus I Directive: What It Means for Your Sustainability Reporting

The European Union’s Omnibus I Directive is now law. After months of negotiation, the European Parliament approved the package on 16 December 2025, and the EU Council formally adopted the final text on 24 February 2026. It will enter into force approximately 20 days after publication in the Official Journal, expected in March 2026. The directive significantly reforms three key frameworks: the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy. 

This Directive aims to reduce complexity, improve clarity, and ensure that businesses can effectively implement sustainability measures. But what does this mean in practical terms? Let’s break down the key takeaways and how businesses should prepare.

What is the EU Omnibus Proposal?

The Omnibus I Directive is a finalised legislative package that amends and simplifies the EU's corporate sustainability framework. Originally proposed by the European Commission in February 2025, the package was substantially revised during negotiations before reaching its final form. The directive targets three regulations: :

• CSRD Implementation: Clarifying reporting timelines, scope, and obligations for companies.
• CSDDD Alignment: Ensuring consistency in corporate due diligence requirements for sustainability impacts.
• EU Taxonomy Adjustments: Aligning classification criteria to improve usability.
• General Streamlining: Reducing administrative burdens while maintaining robust sustainability disclosure requirements.

A separate "Stop-the-Clock" directive, adopted in April 2025, had already delayed Wave 2 and Wave 3 CSRD reporting by two years before Omnibus I was finalised. Omnibus I goes further, making structural changes to the regulations themselves. In essence, the directive seeks to make sustainability reporting more coherent and manageable for businesses across Europe while ensuring that disclosures are consistent, comparable, and actionable for investors and regulators.

Key Changes Businesses Need to Know

1. CSRD Adjustments: A Significantly Narrower Scope 

The CSRD, which expands mandatory sustainability disclosures across the EU, has faced implementation challenges. The Omnibus I Directive introduces the following changes:

Scope is dramatically narrowed. Mandatory reporting is now limited to companies meeting both of the following thresholds:

• More than 1,000 employees
• More than €450 million in net annual turnover

This represents an approximate 85–90% reduction in scope compared to the original CSRD rollout. Listed SMEs are removed entirely. Non-EU companies are only captured if they exceed €450 million in EU turnover and have a EU subsidiary or branch generating more than €200 million within the EU.

Small businesses get relief too. Voluntary ESG reporting standards are introduced for SMEs (Small and Medium Enterprises with fewer than 1,000 employees) through the VSME standard, to reduce upstream data request burdens from larger supply chain partners.

The underlying standards are simplified. Sector-specific ESRS requirements have been removed and mandatory data points have been cut by approximately 70%---though the double materiality principle survives, meaning companies still report on both financial materiality (risks to business performance) and impact materiality (their environmental and social impact).

2. CSDDD: Streamlining Corporate Due Diligence Obligations

The Omnibus I Directive also significantly narrows the scope of CSDDD. It now applies only to:

• EU companies with more than 5,000 employees AND more than €1.5 billion in net worldwide turnover
• Non-EU companies with more than €1.5 billion in EU turnover

Due diligence is not limited to direct (Tier 1) suppliers. Instead, companies must apply a risk-based two-step approach across the full chain of activities. Companies must first conduct a scoping exercise using reasonably available information to identify areas of likely adverse impact, then follow this with in-depth assessments focused on the highest-risk areas identified.

There is no fixed five-year assessment cycle. Due diligence must be ongoing and risk-based.

3. EU Taxonomy: Reducing Complexity and Introducing Voluntary Reporting

The EU Taxonomy, which classifies sustainable economic activities, has been criticised for its complexity. The Omnibus I Directive introduces the following changes:

• Narrowed mandatory Taxonomy alignment to companies meeting the higher CSDDD thresholds. Companies within CSRD scope but below these thresholds move to a voluntary opt-in reporting regime.
• Simplifies reporting through streamlined templates and a roughly 70% reduction in data points, to be implemented via a forthcoming delegated act. Companies will also be exempt from reporting on financially immaterial activities (those contributing less than 10% of turnover, capital expenditure, or total assets).
• Adjustments to the Green Asset Ratio (GAR) for financial institutions, excluding exposures related to newly exempt companies from Taxonomy scope.

4. CBAM: Adjustments to the Carbon Border Adjustment Mechanism

The Omnibus I Directive also introduces key modifications to CBAM, aiming to ease compliance burdens and better integrate it into the broader EU sustainability framework:

• New de minimis threshold: To reduce the burden on small importers, an annual import threshold of 50 metric tonnes per importer has been introduced. This would exempt around 182,000 smaller importers, while still covering over 99% of emissions targeted by CBAM.
• Streamlined administrative processes, allowing companies to reduce CBAM costs when importing from countries with an existing carbon pricing mechanism, preventing double taxation.
• Adjustments to the CBAM pricing mechanism to align with the EU Emissions Trading System (ETS), ensuring fairer cost distribution for affected industries.
• While the CBAM timeline remains on track for full enforcement, the definitive regime is now set to begin in 2026, coinciding with the phase-out of free allowances under the ETS. Additional transitional measures may be introduced to provide businesses with more time to adapt.

How Should Businesses Prepare?

With the Omnibus I Directive now adopted into EU law, businesses should:

✅Reassess CSRD reporting roadmaps. Review and adjust existing CSRD preparation efforts, including reporting timelines, governance structures, and data systems where necessary.

✅Conduct a double materiality assessment. Companies within CSRD scope must identify and prioritise sustainability topics based on both financial risks to the business and the company’s environmental and social impacts. This involves stakeholder engagement, impact and risk analysis, and clear documentation of the methodology and outcomes.

✅Prepare for increased supply chain transparency requests. Companies that fall outside the CSRD scope will still face sustainability data requests from customers, investors, and financial institutions. Establish processes to collect and share relevant ESG data, and consider aligning with the VSME framework to ensure consistency.

✅Strengthen risk-based due diligence processes. CSDDD now requires a risk-based approach across the full chain of activities, prioritising the highest-risk areas rather than applying blanket monitoring.

✅Evaluate voluntary Taxonomy alignment. Companies below CSDDD thresholds may opt in voluntarily to enhance investor transparency and market positioning.

✅Monitor national transposition. Member States must transpose The Omnibus I Directive into national law, and implementation details may vary across jurisdictions.

A Smarter Approach to Sustainability Compliance

 The Omnibus I Directive significantly reshapes the EU’s sustainability reporting framework, aiming to reduce complexity while maintaining the credibility of ESG disclosures. By narrowing CSRD scope, refining due diligence obligations under CSDDD, and recalibrating EU Taxonomy requirements, the Directive reduces regulatory burden while maintaining the credibility of ESG disclosures.  

While these changes help alleviate compliance burdens, sustainability should not be seen purely as a regulatory requirement. Transparent and well-structured reporting strengthens corporate credibility, improves access to financing, and supports long-term resilience in an evolving regulatory landscape. Reliable sustainability data also enables investors and stakeholders to make informed decisions about business risks and opportunities.

Businesses should now focus on implementation and national transposition, as Member States incorporate the Directive into domestic law. At Zevero, we help businesses navigate regulatory changes like the Omnibus I Directive through automated carbon tracking, integrated reporting, and expert sustainability guidance. Want to learn how we can help your business stay ahead? Let’s talk.

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Frequently Asked Questions: EU Omnibus I Directive

1. Why did the EU introduce the Omnibus I Directive?

The EU introduced the Omnibus I Directive to simplify and streamline its corporate sustainability framework. Early implementation of regulations such as CSRD, CSDDD, and the EU Taxonomy raised concerns about complexity, overlapping requirements, and administrative burden for businesses. The Directive aims to improve clarity, reduce reporting obligations for smaller companies, and align the frameworks more closely while maintaining credible sustainability disclosures for investors, regulators, and other stakeholders.

2. When does the Omnibus I Directive take effect?

The Omnibus I Directive enters/ed into force on 16 March 2026. However, the directive still needs to be transposed into national law by EU Member States, meaning specific implementation details may vary across jurisdictions.

3. Does the Omnibus I Directive replace CSRD?

No. The directive does not replace CSRD, but it significantly amends and simplifies its implementation. The most notable change is a narrower scope, limiting mandatory CSRD reporting to companies with more than 1,000 employees and more than €450 million in annual turnover.

4. Are SMEs still required to report under CSRD?

Listed SMEs are no longer required to report under CSRD following the Omnibus I changes. Instead, the EU has introduced voluntary reporting standards for SMEs (VSME) designed to reduce the burden of sustainability data requests from larger companies in their supply chains.

5. How does the Omnibus I Directive affect non-EU companies?

Non-EU companies may still fall within scope if they generate more than €450 million in turnover within the EU and operate through an EU subsidiary or branch generating more than €200 million in EU revenue. These companies may therefore still be subject to sustainability reporting obligations.

6. Does the Omnibus I Directive change CBAM timelines?

The directive introduces adjustments to administrative procedures and thresholds, including a new 50-tonne annual import threshold for CBAM reporting. However, the broader CBAM timeline remains largely unchanged, with the definitive regime beginning in 2026 alongside the gradual phase-out of free ETS allowances.