Companies with over 1,000 employees and €450mn turnover will be required to submit sustainability reports under the revised measures. Photo: Arno Senoner
The sustainability omnibus package cleared its final political hurdle after a year of debate, with the final rule drastically reducing the scope of companies subject to climate reporting rules by 90%.
Changes to the corporate sustainability reporting directive (CSRD) and corporate sustainability due diligence directive (CSDDD) were approved by the European Parliament with 428 in favour, 218 against and 17 abstentions.
The omnibus was launched in February by the EU commission to cut red tape and reduce reporting burdens for companies, which it said was needed in order to boost competitiveness with the US and China.
US president Donald Trump had also increased pressure on the EU to either remove or overhaul its regulations on greenhouse gas pollution which would have applied to non-EU companies operating in the bloc.
Meanwhile, the European Financial Reporting Advisory Group (EFRAG) released its proposed revision of the European Sustainability Reporting Standards (ESRS), which would reduce data points in the standard by more than 70%.
The reality is that investors will likely have less access to data, as a 10-year process to standardise mandatory climate reporting to inform investors and limit greenwashing was derailed in less than 12 months, following a change in political direction after last year’s EU elections.
What’s in the final EU omnibus package
The final omnibus deal reduces the CSRD scope by 90% to companies with 1,000 full-time employees – up from the current threshold of 250 employees – and €450mn in net turnover. It also introduces a review clause about a possible extension in scope for both the CSRD and CSDDD, signalling there could be changes in the future including further simplification.
A value chain cap limits the information that can be requested from companies with under 1,000 employees. Instead, a voluntary sustainability reporting for small- and medium-sized enterprises was adopted in July.
Climate transition plans were also removed from the CSDDD. The directive will only apply to companies with 5,000 employees and €1.5bn net turnover, and the deadline for compliance postponed until July 2029.
The CSRD and CSDDD were meant to increase the availability of ESG information at scale to ensure better data for green products, said Susanna Arus, EU public affairs manager at Frank Bold, a nonprofit on the EFRAG sustainability reporting board.
Now financial institutions will need to rely on external sources such as ESG ratings providers, data firms, and consulting companies.
“Financial institutions that genuinely rely on this information will face a real challenge in accessing vital ESG data on companies’ risks [and] impacts. In practice, this may require dependence on external data providers, often at additional cost, and with less transparency over methodologies,” Arus said.
While the omnibus still needs to be formally approved by the EU council, it will become officially binding 20 days after it is published in the official journal.
ESRS reduces data requirements
The EU’s climate reporting simplification process expanded beyond the CSRD and CSDDD, with EFRAG mandated to reduce the amount of information companies are required to report. Many companies had complained about the thousands of data points needed and there was merit in simplifying the standards, said Vincent Vadeloise, senior research and advocacy officer at Finance Watch.
It was a process that should have been undertaken before politicians began to debate the scope, said Tsvetelina Kuzmanova, a senior project manager at the Cambridge Institute for Sustainability Leadership.
“Our expectation was that a lot of the simplification should be happening through ESRS on a technical level, and once you at least had some information on the company’s reporting under [ESRS], you would be able to wrinkle out the issues that companies could flag so you had some tangible information for simplification,” she said.
Instead, it was a political mess and “even if you have the best technical standards, if they’re not applicable more widely, this still results in less information, less data points”.
The data points in the ESRS were drastically reduced, due to removing elements like strategy, governance, and metrics and targets from individual topical standards, consolidating them in general disclosures instead. All voluntary data points have also been removed and companies that have not introduced climate targets no longer have to provide reasons why, while those with targets do not need to include details about how they will be implemented.
Frank Bold’s Arus said the changes and simplification leave more room for companies to interpret what data is required.
“The framework shifts to a more principles-based approach with much greater discretion left to companies,” she said. “While flexibility has its merits, it also increases reliance on good faith application, which can lead to inconsistency and reduced comparability of ESG data across the market”.
Vadeloise at Finance Watch said he was satisfied with EFRAG’s proposed changes as, while not perfect, “it really tried to reduce the number of data points by rather tackling the qualitative information that could be sometimes quite difficult to compare”.
Still, one area he finds worrying is the introduction of reliefs that would allow companies to omit information if it involves “undue cost or effort”. While this was included in the original draft and only applied if there was a lack of data, it was expanded to all reporting statements.
This adds a second layer of the proportionality principle when performing a double materiality assessment, which could lead to heterogeneous practices, Vadeloise said. “That’s the risk [introduced by] some of the elements that have been added now.”
The EU commission will review EFRAG’s recommendations but is not obligated to accept them.
What happens next
The omnibus process is far from over, with other omnibuses proposed to streamline other sectors and deregulate the EU.
But the process of the first omnibus has been questioned, with several NGOs filing a complaint to the EU parliament’s advisory committee against climate reporting omnibus rapporteur Jorgen Warborn, alleging a conflict of interest due to his position as president of SME Europe, the business association of the European People’s Party.
Meanwhile, review by the EU’s ombudsman into the omnibus process found several procedural shortcomings related to transparency and evidence-based decisions, including reducing consultation times to less than 24 hours over a weekend.
And while the EU is hoping to reduce reporting burdens, it won’t necessarily be the case as it will leave several uncertainties due to the fast revision times, said Vadeloise.
“We think that because we’re going to reduce by 50% and change … the number of data points and the content of data points, we are going to really reduce by 50% the regulatory cost. It won’t be the case, because that means today, the banks, the insurance and now the non-financial institutions, will also be busy reinterpreting the new standards, trying to understand how it applies for them.”
This page was last updated December 18, 2025
Written by
Moriah Costa is the Editor-in-Chief of Green Central Banking and has over a decade of experience writing about banking and finance. She is an award-winning American journalist based in Paris and has written for major international publications, including Reuters, The Guardian, and S&P Global. Having grown up in water-stressed Arizona, she has always had a strong interest in bringing awareness to climate and environmental issues.
