EU Omnibus Package 2025: CSRD, CSDDD, and EU Taxonomy

The EU is planning extensive changes to its central sustainability regulation with the so-called "Omnibus-I" package: including the Corporate Sustainability Reporting Directive (CSRD), the EU Supply Chain Directive (Corporate Sustainability Due Diligence Directive, "CSDDD") and the EU Taxonomy.

The aim of the initiative is to ease the burden on small and medium-sized enterprises (SMEs) – through reduced reporting obligations, simplified standards, and extended deadlines.

However, the package presents not only opportunities but also legal uncertainties. A closer look is worthwhile – especially for internationally active medium-sized companies.

1. Background and Objectives

With the "Omnibus-I" package, the EU is responding to criticism from business: The regulatory burden for CSRD-, CSDDD-, and taxonomy-compliant sustainability reporting is said to be too high, fragmented, and overly complex. The goal is to reduce bureaucracy by up to 25%, and for SMEs even by 35% – without abandoning the strategic objectives of sustainability.

2. Overview of the Main Elements

2.1 CSRD – Changes in Sustainability Reporting

Postponement ("Stop-the-Clock" Directive (EU) 2025/794 of 14 April 2025, already in force)
Postponement of the start of the reporting obligation for companies still within the scope of the CSRD and scheduled to report by 2026 or 2027, by two years.

In detail:

• Large listed companies that were already required to report under the Non-Financial Reporting Directive (NFRD) ("Wave 1"): Reporting obligation for fiscal years from January 1, 2024 remains unchanged.

• All other large companies ("Wave 2"): Reporting obligation only for fiscal years from January 1, 2027 (instead of 2025).

• Listed SMEs ("Wave 3"): Reporting obligation only for fiscal years from January 1, 2028 (instead of 2026).

Reduced Scope through Raised Thresholds
The applicability of the CSRD will in future only apply to companies with

• more than 1,000 employees and

• more than EUR 50 million in revenue or more than EUR 25 million in total assets

Objective: Up to 80% of companies previously affected are to be excluded from the scope of the CSRD.

"Quick Fix" for "Wave 1" Companies
Companies already subject to reporting obligations since 2024 may continue to benefit from certain reliefs in the European Sustainability Reporting Standards (ESRS) until 2026.

Simplification of Existing ESRS
The number of data points should be reduced by up to 70%, sector-specific standards should be omitted, and the principle of materiality should be strengthened. Final drafts are expected by the end of October 2025.

Relief for Non-Reporting SMEs in the Supply Chain
Reporting companies may soon only request information from non-reporting SMEs (companies with ≤1,000 employees) according to the voluntary reporting standard "Voluntary Sustainability Reporting Standard for non-listed SME" (VSME).

Objective: To contain the so-called "Trickle-Down Effect", that is, the passing on of requirements for sustainability reporting by large reporting companies to their smaller, non-reporting suppliers and business partners.

2.2 CSDDD – Relief in Supply Chain Due Diligence

Time Shift ("Stop-the-Clock" Directive (EU) 2025/794 of 14 April 2025, already in force)
Postponement of the start of application by one year – first-time application from July 26, 2028.

Focus on Direct (Tier-1) Business Partners
Companies will only need to focus on direct business partners moving forward. Indirect partners are only to be checked on an ad hoc basis – e.g., when there are plausible indications of violations. This corresponds in substance to Section 9 para. 3 LkSG.

Elimination of the Obligation to Terminate Contracts
The obligation to mandatorily terminate business relationships is removed. Instead, suspension of the relationship and the attempt at joint problem-solving will suffice.

Extended Monitoring Intervals
The monitoring of the appropriateness and effectiveness of risk analysis, prevention, and remedial measures no longer needs to be performed annually; in the future, a review at least every five years will suffice, supplemented by ad hoc audits if there is evidence of new risks or control weaknesses.

Elimination of Civil Liability
The originally envisaged EU-wide civil liability (Art. 29 CSDDD) is abolished. Companies are to be liable only under national law. This creates room for varying levels of liability in member states and new legal uncertainties.

2.3 EU Taxonomy – Streamlining and Reduction

Streamlined Scope:
Only companies with more than 1,000 employees and a turnover of 450 million EUR remain fully subject to reporting obligations; for other companies, reporting will be voluntary.

Reduced Complexity:
The number of data points is to be reduced by around 70%. Criteria for the "Do No Significant Harm" (DNSH) principle are simplified and horizontally applicable to all sectors.

3. Significance for German Companies

Potential for Relief

• For many companies, there is a prospect of a significant reduction in reporting obligations; particularly companies below the new thresholds could fall out entirely.

• Relief is also planned for affected SMEs in the supply chain ("Trickle-Down Effect"). Requirements for sustainability reporting by large companies should not burden smaller companies in their value chains.

Legal Uncertainties

• The EU legislative process is volatile. Negotiations between the European Parliament and Council are ongoing and could significantly alter the final shape of the package.

• A still unclear and fragmented legal situation and possible discrepancies in implementation among member states do not lead to legal clarity.

• NGOs and EU institutions warn of a factual erosion of central sustainability principles.

• Risk of long-term reputation and investor risks despite formal reliefs.

Update on National Implementation
On September 3, 2025, the German government adopted a draft law to amend the Supply Chain Due Diligence Act (LkSG). The goal is a low-bureaucracy implementation of the CSDDD into national law. More on this shortly in a separate Insight.

Recommendations for Sustainability Compliance and ESG

• Keep an Eye on Deadlines & Thresholds: Check whether your company falls under the new timelines and thresholds of CSRD/CSDDD/Taxonomy.

• Structured Gap Analysis: Which obligations are eliminated, which remain?

• Review Supply Chain Compliance: Check your processes for risk analysis, prevention, and remediation. A robust due diligence and ESG reporting infrastructure remains essential – to prepare for future regulatory phases, ad-hoc audits, and customer, supplier, and bank/investor requirements.

• Adapt Contract Design/Terms and Conditions: Adjust your supplier clauses to the new regulations (suspension instead of mandatory termination).

• Monitor National and EU-wide Implementation

• Strategic Use: Position and communicate sustainability and high compliance standards as a competitive advantage – regardless of the regulatory minimum.

Conclusion

The EU Omnibus Package promises less bureaucracy, particularly through extended deadlines, reduced reporting obligations and focused supply chain audits – but ultimately offers no legal certainty. For German medium-sized businesses, this means: Examine closely, act strategically, and make targeted use of remaining room for maneuver.

Sustainability, ESG reporting obligations, and strategic compliance remain a central competitive factor – even under a reformed EU sustainability law.