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: namely the Corporate Sustainability Reporting Directive (CSRD), the EU Supply Chain Directive (Corporate Sustainability Due Diligence Directive, "CSDDD"), and the EU taxonomy.

The goal of the initiative is to relieve small and medium-sized enterprises (SMEs) - through reduced reporting obligations, simplified standards, and extended deadlines.

However, the package carries not only opportunities but also legal uncertainties. A close look is worthwhile - especially for internationally active mid-sized companies.

1. Background and Objectives

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

2. Overview of Key Elements

2.1 CSRD - Changes in Sustainability Reporting

Timing Adjustment ("Stop-the-Clock" Directive (EU) 2025/794 of 14 April 2025, already in force)

Postponement of the start of the reporting obligation for companies that currently still fall within the scope of the CSRD and would be required to report from 2026 or 2027, by two years.

In detail:

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

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

• Capital market-oriented SMEs ("Wave 3"): Reporting obligation only for fiscal years from 1 January 2028 (instead of 2026).

Reduced Scope by Raising Thresholds

Applicability of the CSRD in the future only to companies with

• more than 1,000 employees and

• more than EUR 50 million turnover or more than EUR 25 million balance sheet total

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

"Quick Fix" for "Wave 1" Companies

Companies already required to report since 2024 may continue to claim certain reliefs under the European Sustainability Reporting Standards (ESRS) until 2026.

Simplification of existing ESRS

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

Relief for non-reporting SMEs in the Supply Chain

Reporting companies may 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) in the future.

Objective: To contain the so-called "Trickle-Down Effect", i.e., to curb 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 from Due Diligence in the Supply Chain

Timing Adjustment ("Stop-the-Clock" Directive (EU) 2025/794 of 14 April 2025, already in force)

Postponement of the start of application by one year - first application from 26 July 2028.

Focus on Direct (Tier-1) Business Partners

Companies will only have to focus on direct business partners in the future. Indirect partners are only to be checked on a case-by-case basis - for example, in the event of plausible indications of violations. This corresponds substantively to Section 9 para. 3 LkSG.

Abolition of the Obligation to Terminate Contracts

The obligation to compulsorily terminate business relationships is deleted. Instead, the suspension of the relationship and the attempt at joint problem-solving is sufficient.

Extended Monitoring Intervals

Monitoring the adequacy and effectiveness of risk analysis, prevention, and remediation measures no longer has to take place annually; in the future, a review at least every five years is sufficient, supplemented by ad-hoc checks in case of indications of new risks or control weaknesses.

Abolition of Civil Liability

The originally planned EU-wide civil liability (Art. 29 CSDDD) is abolished. Companies will only be liable under national law. This creates room for different liability levels in the member states and new legal uncertainties.

2.3 EU Taxonomy - Streamlining and Reduction

Streamlined Scope:

Only companies with more than 1,000 employees and 450 million EUR turnover remain fully required to report; for other companies, reporting becomes voluntary.

Reduced Complexity:

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

3. Significance for German Companies

Potential for Relief

• Many companies are facing significant reductions in reporting obligations, especially companies below the new thresholds could be completely excluded.

• Also, for affected SMEs in the supply chain ("Trickle-Down Effect"), reliefs are planned. 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 configuration of the package.

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

• NGOs and EU institutions warn of an actual weakening of central sustainability principles.

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

Update on National Implementation

On 3 September 2025, the federal government adopted a bill to amend the Supply Chain Due Diligence Law (LkSG). The goal is a bureaucracy-light implementation of the CSDDD into national law. More on this soon 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?

• Supply Chain Compliance Check: Review your processes for risk analysis, prevention, and remediation. A robust due diligence and ESG reporting infrastructure remains essential - for preparation for future regulatory phases, ad-hoc checks, and requirements from customers, suppliers, and banks/investors.

• Adjust Contract Design/Terms & Conditions: Adapt your supplier clauses to the new requirements (suspension instead of compulsory 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, especially through extended deadlines, reduced reporting obligations, and focused supply chain checks - but ultimately offers no legal certainty. For German mid-sized companies, this means: looking carefully, acting strategically, and using the remaining scope purposefully.

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