The EU Omnibus Proposal: 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 was published in the Official Journal of the EU on 26 February 2026 as Directive (EU) 2026/470 and entered into force on 18 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 Directive?

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 in the Omnibus

1. CSRD: 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 an EU subsidiary or branch generating more than €200 million within the EU. According to EFRAG, this reduces the number of non-EU companies in scope from approximately 10,000 to around 1,200. For UK-headquartered businesses specifically, approximately 150 to 200 companies are estimated to remain in scope. EFRAG is expected to publish a draft reporting standard for non-EU companies (N-ESRS) for consultation in mid-July 2026, which will set out the specific disclosure requirements for those that remain within scope.

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 over 60%, with total data points reduced by over 70% following the removal of all voluntary disclosures---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: Streamlined 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 generating more than €1.5 billion in net turnover within the EU (no employee threshold applies to non-EU entities)

Rather than blanket monitoring of the full supply chain, companies must apply a risk-based two-step approach. Companies first conduct a scoping exercise using reasonably available information to identify areas across their operations, subsidiaries, and relevant business partners where adverse impacts are most likely and most severe. In-depth assessments are then limited to those highest-risk areas only.

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

3. EU Taxonomy: Reduced 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 significant 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 exempts around 182,000 smaller importers, while still covering over 99% of emissions targeted by CBAM. The threshold does not apply to hydrogen and electricity imports, which remain subject to full CBAM obligations regardless of volume.
• Streamlined administrative processes, allowing companies to reduce CBAM certificate costs where a carbon price has already been paid in the country of origin.
• Adjustments to the CBAM pricing mechanism to align with the EU Emissions Trading System (ETS), ensuring fairer cost distribution for affected industries.
• The definitive CBAM regime entered into force on 1 January 2026, coinciding with the phase-out of free allowances under the EU Emissions Trading System (ETS).

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 two-step risk-based approach: a scoping exercise to identify high-risk areas, followed by in-depth assessments focused on those areas only.

✅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.