Sustainability Regulation in the Winds of Change – The Commission’s Omnibus I Proposal

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What is Omnibus all about?

On 26 February 2025, the European Commission published a new directive proposal, known as the Omnibus I proposal, which proposes amendments to several already adopted EU directives and regulations related to sustainability regulation.[1] In this blog post, we review the key changes proposed, and in the second part of the blog, we will take a closer look at Finland’s positions on the proposed amendments.

The Omnibus I proposal concerns the Corporate Sustainability Due Diligence Directive (CS3D), the Corporate Sustainability Reporting Directive (CSRD), the Carbon Border Adjustment Mechanism (CBAM), and the Taxonomy Regulation – i.e., the classification system for sustainable finance.

The Omnibus I proposal is driven by the Commission’s intention and aim to streamline and harmonise regulation, reduce companies’ administrative reporting burden, and eliminate overlaps between the CSRD and the CS3D. According to the Commission, simplified and more flexible obligations could, in the future, lead to voluntary sustainability and taxonomy reporting.

In addition, the Commission proposes deferring the application of the CS3D and certain obligations under the CSRD through a separate so-called “Stop-the-clock” proposal.[2] This Stop-the-clock directive proposal was approved in a vote by the European Parliament on 3 April 2025. This means that companies were granted additional time for sustainability reporting as follows:

  • Companies reporting as of 2025 (the so-called second wave companies) were granted an extension until 2027, and
  • Companies reporting as of 2026 (the so-called third wave companies) were granted an extension until 2027 and 2028.

In other words, companies included in the second wave must publish their first CSRD-compliant sustainability report in 2027, and third wave companies must publish their first CSRD-compliant report starting from 2028.

The postponement of the application period does not affect the reporting obligations of companies that have already published their first sustainability report as of 2024. However, it is possible that the amendments to the substance and scope of the regulation under the Omnibus I proposal may impact the obligations of these first wave reporters. The Stop-the-clock directive was published in the Official Journal of the European Union on 16 April 2025 and entered into force on 17 April 2025. The Directive must be transposed into national legislation by no later than 31 December 2025 – that is, national laws in Member States must be amended accordingly by that date. With the approval of the Stop-the-clock proposal, the national transposition of the CS3D was also granted an additional year. Furthermore, the application of the obligations would commence on 26 July 2028 for companies with more than 3,000 employees and a turnover exceeding EUR 900 million.

It is noteworthy that through the Omnibus I proposal, the European Commission proposes amendments to legislation that has already been adopted – some of which has already been transposed into national law and is currently applicable in the Member States, while other parts are still in the process of being implemented. Although the Stop-the-clock directive concerning application timelines has now been approved, the substantive amendments in the Omnibus I proposal to the various directives and regulations still require processing through the EU’s ordinary legislative procedure – that is, trilogue negotiations and the approval of both the Parliament and the Council.

According to current information, the intention is to process the substantive amendments of the Omnibus I proposal at the EU level so that the process would be completed by the end of 2025.

Proposed amendments to the Corporate Sustainability Reporting Directive

The requirements of the Corporate Sustainability Reporting Directive (“CSRD”) have already been transposed into national legislation through Chapter 7 of the Accounting Act (1336/1997, as amended).

Reporting requirements

The Omnibus I proposal introduces amendments to the reporting requirements for smaller companies as set out in the CSRD. Moreover, the scope of the CSRD would be narrowed to apply only to larger companies, reflecting a more proportionate approach to sustainability reporting based on company size. According to the Commission, this would nonetheless ensure the achievement of the Directive’s objectives.

  • Limitation of scope: The Commission proposes that reporting obligations should be limited only to larger companies with (i) more than 1,000 employees and (ii) a turnover exceeding EUR 50 million or a balance sheet total exceeding EUR 25 million. This would narrow the scope of the CSRD by approximately 80 percent compared to its original scope, meaning that a significant number of companies would no longer be covered by the CSRD. Consequently, the total volume of reported sustainability data would also decrease substantially. In Finland, the number of companies subject to the reporting obligation would fall from approximately 1,300 to fewer than 300.
  • Voluntary reporting standard for smaller companies: Companies with fewer than 1,000 employees would be permitted to report sustainability information in accordance with a voluntary sustainability reporting standard. This refers to the voluntary sustainability reporting standards (“VSME”) published by the European Financial Reporting Advisory Group (“EFRAG”) as a recommendation from the Commission for companies that are not subject to mandatory sustainability reporting under the CSRD.
  • Simplification of reporting standards: Sustainability reports under the CSRD are prepared in accordance with the European Sustainability Reporting Standards (“ESRS”), from which the reporting company selects the relevant reporting topics based on its double materiality assessment. The ESRS contains numerous data points, which refer to information that must be included in the sustainability report. The Commission proposes, through a delegated regulation, to reduce and clarify the number of mandatory data points. Furthermore, the Omnibus I proposal would abandon the adoption of sector-specific standards, which would otherwise have increased the reporting burden in certain industries. The proposed amendments aim to ensure consistency and better comparability of the information included in sustainability reports.
  • Limitation of data request obligations and protection of smaller companies: Companies that are subject to sustainability reporting requirements will continue to report information on their value chain (e.g., subcontractors, distributors, suppliers). This requires that relevant information be obtained from such operators. In order to avoid imposing an unnecessary burden on small and medium-sized companies in the value chain with extensive information requests, the Omnibus I proposal suggests a limitation, under which companies with fewer than 1,000 employees located in the EU and outside the EU may be required to provide information in accordance with the above-mentioned VSME standard or information that is normally shared between companies in the sector concerned.
  • Assurance level for sustainability reporting: The original CSRD includes a provision stating that reasonable assurance could be required for the assurance of sustainability reports in the future. Therefore, verification based on limited assurance would continue to be required.

Impact on existing legislation

In practice, the Omnibus I proposal consists of several elements, of which the Stop-the-clock proposal has already been adopted. The actual substantive amendments are still under negotiation. Accordingly, the situation remains uncertain, for example, for companies whose reporting obligations may be affected by possible amendment to the employee threshold. For this reason, we recommend that such companies continue their preparations for CSRD reporting until further clarity is available regarding the final content of the proposed amendments.

Proposed amendments to the Corporate Sustainability Due Diligence Directive

The Corporate Sustainability Due Diligence Directive (CS3D) has not yet been transposed into national legislation but is currently under preparation at the Ministry of Economic Affairs and Employment. As mentioned above, due to the adoption of the Stop-the-clock proposal, the deadline for national implementation of the Directive will be extended by one year. Accordingly, the Directive must be transposed into national legislation by 26 July 2027.

Following the adoption of the Stop-the-clock proposal, the scope and application dates of the obligations under the CS3D will be amended as follows:

  • As of 26 July 2028 – Companies established under the laws of an EU Member State with more than 3,000 employees and a turnover exceeding EUR 900 million, as well as non-EU companies generating a turnover exceeding EUR 900 million within the EU.
  • As of 26 July 2029 – Other companies with more than 1,000 employees and a turnover exceeding EUR 450 million.

Due Diligence Obligation

The Commission proposes limiting the due diligence obligation under the CS3D to the company itself, its subsidiaries, and only the first tier of the company’s value chain. This would mean that a company’s due diligence obligation would only extend to companies at the beginning of the value chain and not to the entire value chain, which has been the requirement of the CS3D to date. In practice, the due diligence obligation would be significantly narrowed, as most environmental and human rights risks occur at the end of the value chain. However, where a company has credible information indicating that actual or potential adverse environmental or human rights impacts are occurring or likely to occur beyond the first tier, it must also extend its due diligence review to such entities. Nevertheless, the Omnibus proposal states that a company within the scope of the Directive must request a commitment from its direct business partner to ensure that the company’s own Code of Conduct is respected not only by the direct partner but also further down the value chain.

In addition, under the Omnibus proposal, companies may primarily request information from small businesses (fewer than 500 employees) only in accordance with the voluntary standards for sustainability reporting (VSME) developed by EFRAG, rather than the full information required under the due diligence obligations of the CS3D. This aims to prevent the so-called trickle-down effect on smaller companies. The Commission has not yet adopted the VSME standards published by EFRAG.

The Commission further proposes that companies should not be obliged to terminate business relationships even in situations where actual or potential adverse impacts on human rights or the environment have already occurred. This means that companies should not be forced by regulation as a last resort to disengage from business relationships that expose them to environmental and human rights risks, but that such business relationships may be continued provided that the company has nevertheless attempted to promote change and used its influence to eliminate the impacts.

In addition, the Commission proposes that companies should assess the effectiveness and adequacy of their due diligence measures every five years instead of annually. Such an assessment would also be required whenever there is a justified reason to believe that the measures are no longer adequate or effective.

The due diligence obligation would also be amended so that the obligation of a company’s stakeholders to participate in the implementation of the due diligence obligation would be narrowed.

Climate Transition Plan

The Commission proposes amendments to the implementation of the climate transition plan as well as aligning related requirements with the CSRD. According to the Commission, implementation of the climate transition plan should include a description of both the intended and completed implementation measures. The most substantive change is that companies would no longer be obliged to implement the transition plan, but merely to prepare one.

Sanctions and Civil Liability

The proposal also includes the removal of the harmonised rules on civil liability at the EU level. Civil liability would instead be determined under the national private law of each Member State. The right of trade unions or civil society organisations to bring damage claims based on authorisation would also be removed. Civil liability would therefore be determined by each Member State in accordance with its national private law provisions. This would mean that the conditions for civil liability would not be harmonized at EU level. Each Member State would be free to determine its own conditions for compensation, potentially resulting in substantial variation between national frameworks.

Moreover, the minimum threshold for the maximum level of pecuniary sanctions (set at 5% of global net turnover in the original directive) is proposed to be deleted. Going forward, the Directive would no longer regulate the maximum amount of penalties. Instead, the Commission, in cooperation with Member States, would be required to establish guidelines on the imposition of such sanctions.

Other implications of the Omnibus proposal

EU Taxonomy

The Omnibus proposal aims to harmonise the taxonomy-related reporting obligations with the requirements of the CSRD. Taxonomy reporting would only apply to companies with more than 1,000 employees and a turnover exceeding EUR 450 million. In addition, voluntary partial taxonomy reporting would also be introduced in this reporting.

Carbon Border Adjustment Mechanism (CBAM)

Under the proposal, the Carbon Border Adjustment Mechanism would not apply to small operators but rather focus exclusively on large operators. In addition, the proposal eases the requirements for monitoring emissions, reporting, and calculating emissions for operators falling within its scope, and postpones the obligation to purchase certificates to cover CBAM products from 2026 to 2027.

 

[1] DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directives 2006/43/EC, 2013/34/EU, (EU) 2022/2464 and (EU) 2024/1760 as regards certain corporate sustainability reporting and due diligence requirements, REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) 2023/956 as regards simplifying and strengthening the carbon border adjustment mechanism

[2] DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directives (EU) 2022/2464 and (EU) 2024/1760 as regards the dates from which Member States are to apply certain corporate sustainability reporting and due diligence requirements

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