Introduction
In February of 2025, the European Commission launched the first “Omnibus” proposals (Omnibus I and II). Omnibus I is a legislative package aimed at simplifying the rules of the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) and proposes amendments to the Carbon Border Adjustment Mechanism (CBAM). Omnibus II is a legislative package that contains simplifications and amendments to the InvestEU fund.
In legislation, an “omnibus bill is a proposed law that covers a number of diverse topics”. In this case, the Omnibus refers to the collection of simplifications of the aforementioned directives and funds. Omnibuses I and II are the first two of these packages, but as we will examine later, there are more on the horizon.
The stated goal of these packages is to reduce regulatory burden for businesses and to streamline EU legislation. Additionally, it aims to help mobilise extra funding for InvestEU recipients. We will delve into how this is being done and what effect this will have on EU companies, but more specifically Small and Medium Enterprises (SMEs). Following this, we will analyse the EU’s simplification agenda and what it means for the future of climate policy in the EU. Finally, we will explore what this means for SMEs’ climate goals.
The affected legislation
Below we will outline the main instruments affected by these proposed legislative packages and how exactly Omnibus I and II will alter them.
Corporate Sustainability Due Diligence Directive (CSDDD)
Adopted in 2024, the CSDDD requires that businesses in the EU prevent adverse human rights impacts and mitigate climate change by employing sustainable and responsible practices in all stages of its value chain. In short, Companies must integrate risk-based human rights and environmental due diligence into their policies and risk management systems, including a long-term strategy, a code of conduct, compliance processes, and regular updates (at least every 24 months). This directive has not yet been transposed or applied by companies but would have been in effect in early 2026.
Under the Omnibus proposal however, the CSDDD will be simplified. This will be done by targeting the need for companies to report on indirect business partners in their value chains. Additionally, the directive limits the information large companies can request from SMEs to what is included in the CSRD voluntary sustainability standards, unless essential data cannot be obtained otherwise. There is also a plan to “reduce the required frequency of periodic monitoring exercises” meaning companies are now only required to conduct ESG (Environmental, social and governance) impact reviews every 5 years instead of annually. Its implementation has also been postponed by one year to 2028 (instead of the originally planned date of July 2027).
Corporate Sustainability Reporting Directive (CSRD)
This directive entered into force for large companies in 2024 and aims to standardise corporate sustainability reporting requirements with the aim of enhancing accountability and transparency. Companies under its scope must report using the European Sustainability Reporting Standards (ESRS) in order to ensure “comprehensive, standardised and comparable reporting” in order to achieve the goals of the EU Green Deal.
Under the Omnibus proposal however, around 80% of companies will be removed from the scope of the CSRD and will instead only encompass companies with more than 1000 employees and either a turnover above €50million or a balance sheet above €25 million. Furthermore, the ESRS will be revised and simplified. In addition, a “stop the clock” initiative is being proposed to postpone these reporting requirements for companies in the scope by two years. Finally, in order to protect SMEs, a simplified and voluntary reporting standard will be created for them that will act as a “shield” against data requests from larger companies that are subject to the CSRD reporting requirements.
Carbon Border Adjustment Mechanism (CBAM)
The Carbon Border Adjustment Mechanism (CBAM) is the EU’s tool to prevent carbon leakage (when businesses relocate production to countries with looser climate rules to avoid carbon costs, potentially increasing global emissions. By placing a carbon price on imports of certain goods from outside the EU, it ensures that imported products face the same carbon costs as goods produced within the EU.
The proposed simplifications to this mechanism would exempt a large number of SMEs from its scope. Additionally, importers of less than 50 tonnes of CBAM goods per year, or roughly 80 tonnes of CO₂ equivalent, will be fully exempt from obligations. For those still covered, the reforms streamline reporting, emissions calculations, and authorisation processes, while also strengthening anti-abuse measures and coordination with national authorities. The proposed CBAM exemptions will still cover 99% of emissions while allowing exemptions for 90% of EU companies from reporting requirements.
InvestEU is an EU investment program that mobilizes public and private financing to support sustainable growth, innovation, and job creation across Europe. As it currently exists, it brings together several EU financial instruments under one umbrella, backed by an EU budget guarantee of €26.2 billion, aiming to trigger over €372 billion in investment in key areas like green transition, digitalization, SMEs, and social infrastructure.
The amendments to InvestEU focuses on easing administrative burdens, particularly for SMEs, by exempting them from certain reporting requirements. These changes are expected to save around €350 million for implementing partners, intermediaries, and final recipients, and directly support SMEs by waiving certain obligations like Key Performance Indicator (KPI) reporting for small transactions. It also aims to increase the EU guarantee by €2.5 billion and to enable the use of legacy programme funds to mobilise more investment.
How does it affect EU companies?
What do these amendments and simplifications mean for companies operating in the EU? The Commission claims that the package will reduce “administrative burdens by 25% for all businesses and 35% for SMEs”. It adds that the CSRD amendments specifically could save administrative costs of €4.4 billion annually.
According to a Commission Q&A, the changes to InvestEU will also allow for the mobilisation of another €50 billion in investment for EU companies. This will drastically increase the livelihood of new and existing innovative companies.
Another important aspect of this legislation is the potential of reduced costs for SMEs. SMEs make up over 99% of EU companies and thus maximising their livelihood is of the utmost importance in ensuring the durability of our economy. Removing SMEs from the scope of the CSRD and will allow SMEs to both tailor their reporting to the specific needs of their stakeholders and thus save costs. Many outlets also outline the difficulty SMEs would have had in navigating the complex regulatory landscape of these directives, a huge obstacle which has now been alleviated.
What does this signal about deregulation at the EU level?
The simplification of regulation has been a priority of the EU ever since the unveiling of the Commission’s Better Regulation Agenda back in 2015. However, the cascading stream of simplification we are seeing after the proposal of the first Omnibus package is reminiscent of the deregulation drive as part of the completion of the European Single Market in the 1980s.
Indeed, the Commission appears to want to introduce further measures similar to the first two Omnibus packages in the future. Omnibus III and Omnibus IV, the third and fourth Omnibus simplification packages which were recently announced, will focus on the Common Agricultural Policy (CAP) and the reduction of red tape in the digital sector respectively. Furthermore, a specific Omnibus package for defence has been posited by the Commission and is currently the subject of discussion within the SEDE committee in the European Parliament.
As a reference, we recently saw the proposed scrapping (or at least watering down) of the Green Claims Directive, a directive which would have seen businesses required to substantiate all voluntary environmental claims made about their products and regulate environmental labels. The reason given for this was that the discussions about this directive “go against the Commission’s simplification agenda”. This further exemplifies the cutting of red tape that is trending throughout EU legislation lately.
What caused this drive for simplification? It is probably due to several components, such as growing consensus among SMEs that the reporting requirements of the EU were simply too burdensome. Indeed, SMEunited, an organisation representing SMEs at the EU level, have hailed the Omnibus as much needed “breathing space for SMEs”. Compounding this issue is the fact that costs for businesses have become too high in recent years following geopolitical tensions, uncertainty in the wake of the pandemic and rising inflation. Reporting requirements are another administrative cost that companies would rather do without. Finally, perhaps political pressure from civil society, companies and politicians who think that there is simply too much bureaucracy at the EU level and that its laws are too burdensome created this drive to amend this issue. The Centre for European Policy Studies (CEPS) have cited this “overload” in sustainability reporting requirements.
What does this mean for the Commission’s approach to climate legislation?
Simplification has always been a cornerstone of the EU’s model of growth, but is this potential stripping back of the EU’s green agenda the death knell of its climate ambitions? Should SMEs continue to pursue ambitious climate goals and report on their sustainability efforts if the EU agenda seems to be steering away from this direction?
The dichotomy between boosting European competitiveness while also ensuring that that the ambitious climate goals of the EU are reached has been at the forefront of all negotiations regarding this package. Certain critics of the Omnibus state that the legislative package poses the risk of “diluting” the EU’s climate ambitions. Outlets that fight for environmental goals such as the WWF claim that transparency, accountability and environmental goals are being diminished “under the guise of simplification”. Bruegel have also raised concerns that the Omnibus may cause us to lose critical data on sustainability reporting that may undermine the green transition.
However, it is important to note that these exemptions and simplifications do not do away with the aims of these directives entirely. In fact, the simplifications are poised as a means of attracting investment so that the transition to a sustainable economy is made easier for SMEs.
Moreover, as previously mentioned, the CBAM exemptions will still cover 99% of emissions while allowing exemptions for 90% of EU companies from reporting requirements, which exemplifies the Commission’s ongoing commitment to tackling emissions.
Indeed, Commissioner Hoekstra exemplified at a recent forum that we cannot pretend to forget that climate change is a global issue and that simplification and the attainment of the EU’s climate goals will be part of the same process. He continued that industry and competitiveness are still to go and in hand and that there is an “excellent business case for the green transition”, meaning that companies that prioritise sustainable investments and continue with reporting on corporate sustainability are more likely to flourish in the future. SMEs can still benefit greatly from corporate sustainability reporting despite not being included in the scope of the EU’s directives, as it can potentially give a competitive and reputational advantages, decrease costs, help in identifying risks and may aid in attracting investment and finance.
Additionally, despite all the simplification, environmental goals have not left the EU agenda. In fact, the Climate Adaptation Plan and the Circular Economy Act are currently being discussed and are set to be adopted in 2026. Moreover, it appears that climate mainstreaming is occurring in most areas of EU policy, as climate ambitions feature heavily in plans such as the AI Continent Action Plan, the Advanced Materials Act and the Steel and Metal Action plan. This is why it is still pivotal that SMEs still pursue environmental goals and continue reporting if they can despite the advent of the Omnibus proposals, as climate adaptation will become more and more important as time goes on. Nevertheless, the simplifications as part of the Omnibus will alleviate the regulatory barrage they face.
Conclusion
Overall, the Omnibus packages appear to be a welcome initiative by all those it affects and is a vital step in ensuring that the climate goals of the EU are achievable for smaller businesses. Climate change has not left the EU agenda despite increasing simplification, and these measures are but another crucial step in ensuring that competitiveness of European SMEs and climate goals go hand in hand.
At Lykke Advice, we help SMEs navigate the complexities of EU policymaking, ensuring they’re strategically positioned to take full advantage of upcoming legislation. As many of the new Omnibus packages increasingly focus on small and medium-sized enterprises, it’s more important than ever for SMEs to engage proactively to unlock opportunities that take advantage of this regulatory simplification.
As a boutique public affairs consultancy, we deliver personalised support that larger firms often can’t match. Our services are designed to guide clients through the EU landscape with clarity, dependability, and efficiency. For more information about how we can support your organisation, contact us at info@lykkeadvice.eu.
by Farweb