Don’t fall into the EU Omnibus trap: Sustainability’s direction hasn’t changed

The European Union recently released its anticipated “streamlining” of sustainability regulations—the “Omnibus” package. Many across politics, media, and business are either overplaying or misinterpreting its extent and impact. Whatever your company size, one especially dangerous interpretation is thinking the Omnibus gets you off the hook. The enormous positive opportunities in addressing sustainability, including the platform ESG reporting gives your business, have also not gone away. Don’t mistake turbulence for thinking the overarching direction of sustainability has changed.

The Omnibus largely means fewer mandated data points. Companies with more than 1,000 people are required to meet the most demanding requirements—20% of the original catchment (see more below). But it’s the largest companies that govern how industries and systems function. The package does limit what data large customers can request from small-medium suppliers, but it doesn’t eliminate the fundamental need to collect data. Also, it doesn’t remove the positive opportunities found in the data, analysis, and baselining needed to report. As we heard firsthand from a firm well ahead of the regulations:

Regulatory frameworks do not motivate our data gathering, materiality assessments, and disclosure. Data drives climate-related opportunities and ensures efficient climate mitigation in our farming business. The same goes for all material sustainability factors.
 
Kernel is integrating the most ambitious standards regardless of ongoing reviews and changes. We are creating some level of stability, reducing uncertainty, and facilitating long-term planning. Huge benefits in today’s highly turbulent world.

—Marta Trofimova, Head of Sustainability, Kernel

For companies large and small, positive opportunities remain in the data gathering, analysis, and baselining of sustainability risk and impact

The time and energy required for sustainability reporting provide a platform for identifying your most material spheres of influence across environmental, social, and economic goals. This materiality assessment enables your (usually overstretched) sustainability and cross-organizational teams to focus on aligning with the global sustainability context (the ideal goal of regulation) and maximizing positive impact and business value.

Businesses of all sizes must realize this opportunity and exceed the minimum regulation demands. Not only will regulation—in the long-term, despite turbulence—the trend toward the 17 UN Sustainable Development Goals (SDG), but the direction of industries and the planet must, too.

What is the EU Omnibus package?

The EU Omnibus package raises the Corporate Sustainability Reporting Directive (CSRD) threshold from companies with 250 employees and Euro 25 million in revenue to those with more than 1,000 people and 50 million in revenue. This exempts around 80% of previously impacted firms. The limit for non-EU firms was raised from 150 million to 450 million. Companies in “waves two and three” were given a two-year reporting delay. Limitations were placed on what can be requested of small-medium suppliers (voluntary standards are included).

Implementing the Corporate Sustainability Due Diligence Directive (CSDDD) is delayed until mid-2028. The directive is now limited to direct suppliers rather than full supply chains. Penalties have been softened. Both fines related to global turnover and civil liability were removed. Assessment will be required every five years rather than annually.

Only companies with more than 1,000 people and Euro 450 million must now report to the EU taxonomy (again, exempting 80%) with reduced data requirements. However, the CSRD’s “double materiality” mandate to disclose sustainability risks and impacts remains.

The Omnibus package also revises the Carbon Border Adjustment Mechanism (CBAM), introducing a 50 metric-ton-per-year minimum threshold and removing obligations for more than 180,000 importers. However, the EU claims 99% of emissions will still be covered, and if correct, this further emphasizes how large firms dictate the fight against the climate and sustainability emergency.

Additionally, the European Sustainability Reporting Standards (ESRS; underpins the CSRD) will be streamlined, including reducing the number of data points in materiality and risk assessments. Sustainability-related public procurement rules are also being softened.

The good part of the Omnibus: Simplifying disclosure where it doesn’t positively affect sustainability is welcome

Saving overstretched sustainability teams from reporting is a win. But that is not a let-off. It’s an opportunity to focus on impact and value—what the original regulations were leading to.

Despite complications and pushbacks, the ESRS has established a direction toward unified practices of managing sustainability data. Kernel is determined to follow this path.
 
Over the last two years, our sustainability function has improved the quality of non-financial data collection and processing, particularly accounting emissions from agriculture operations: a major material topic (we calculate the carbon footprint for each of our 5,000 fields and every key crop).

— Marta Trofimova, Head of Sustainability, Kernel

Being ahead and being part of how the new system comes about will always beat frantically reacting to catch up

Our sustainability research framework at HFS centers on how a critical mass must come together to prove that sustainability works in all its environmental, social, and economic elements. This will create positive tipping points that align policy, consumer behavior, and industries with the trajectories that climate and sustainability goals need. Companies at the center of that systems change will be rewarded by policymakers, customers, and other businesses as part of the new standard others strive toward.

We also call on the financial sector to lead on transition planning and help its clients and ecosystems do the same, given that regulation lags behind the global context. Our separate report asks that 2025 become the year of CSRD and more
(see Exhibit 1).

Exhibit 1: Five themes we’re exploring in 2025 to go beyond EU’s CSRD to embed sustainability and systemic change

Source: HFS Research 2025; source 1; source 2; source 5

The Bottom Line: Don’t interpret turbulence as a reason to deprioritize and waste your value opportunities and leadership over the coming decades.

The EU Omnibus is a well-intentioned trap. The direction of sustainability hasn’t changed. Don’t waste the platform ESG reporting creates and the organizational and ecosystem collaboration it facilitates.

Sustainability is cemented as a differentiator for the vast majority of businesses. Don’t default to the bare minimum. Identify your most material spheres of influence to achieve sustainable impact and value for your organization and ecosystem. That’s the whole point of reporting.