Three misconceptions about the Omnibus Proposal
that could harm your sustainability strategy
The Impaakt Team
6 min Read Time | March 12th 2025
The European Commission’s Omnibus Proposal, announced on February 26, 2025, aims to reshape sustainability reporting by streamlining requirements and reducing their scope. While designed to simplify the sustainability regulatory landscape, the proposal has sparked concerns about its potential impact on corporate accountability. Critics argue that reduced reporting obligations could create gaps in the sustainability data needed for informed decision-making, potentially weakening transparency and oversight.
The first Omnibus proposal, often referred to as the “Stop the Clock” approach, suggests a two-year delay in the CSRD’s application to large companies currently not subject to the NFRD and listed SMEs. This delay would prevent these companies from falling in and out of scope between 2025 and 2026, saving them from unnecessary compliance costs during this transitional period. The delay would also give time for the second Omnibus proposal to be debated and approved, which could potentially exempt up to 80% of companies from reporting obligations. This two-step process aims to clarify the reporting landscape before any final decisions are made.
Under Omnibus II’s proposed changes, mandatory reporting would primarily apply to:
- Large European companies with over 1,000 employees and either a net turnover of €50 million or above or a balance sheet total of €25 million or above.
- For non-European companies, only those with EU-based sales exceeding €450 million would remain in scope for group-level reporting. Additionally, the threshold for the EU branch is raised from €40 million to €50 million, and reporting will be required if the non-EU company has a large subsidiary in the EU.
While this shift may lead some businesses to believe that sustainability reporting is now optional, it is important to note that the Omnibus Proposal is not yet law. The CSRD, however, is in effect. The Omnibus must still go through the EU legislative process before being implemented. Regardless of the regulatory outcomes, sustainability remains a strategic imperative, not merely an administrative burden.
The perceived simplification of regulatory demands has led to several misconceptions that could harm long-term business resilience. Specifically, many companies are mistakenly assuming that:
1. Reduced mandatory reporting eliminates the need for any sustainability reporting;
2. The removal of the sector-specific standards makes aligning with industry peers irrelevant; and
3. A less stringent regulatory environment means compliance is no longer necessary.
Let’s examine each of these misconceptions in greater detail.
Misconception 1: “With reduced mandatory requirements, sustainability reporting is now obsolete”.
While the Omnibus proposes to narrow the scope of mandatory sustainability reporting, the need for transparency and accountability in sustainability has not diminished. Even if companies fall outside the new scope, stakeholders, including investors, customers, and financial institutions, will continue to expect environmental, social, and governance (ESG) disclosures. Sustainability-linked finance, such as green bonds and ESG-linked loans, requires transparent sustainability reporting regardless of regulatory mandates. The European Commission has also indicated that voluntary reporting frameworks, such as the Voluntary SME Standards (VSME), will continue to be available for companies that wish to demonstrate ESG leadership. Sustainability reporting provides invaluable insights into impacts, risks, and opportunities, enabling companies to proactively address potential challenges and capitalise on emerging trends. Rather than viewing it as a mere regulatory formality, businesses should recognise such reporting as a powerful instrument for strategic foresight, risk mitigation, and innovation.
Misconception 2: “The Omnibus Proposal’s removal of the sector-specific standards makes aligning with my industry peers irrelevant.”
Although sector-specific ESRS standards may no longer be mandatory, aligning with globally recognised sustainability frameworks, such as the GRI, or voluntary EU reporting guidelines, remains essential. By aligning with sector-specific benchmarks, businesses are better positioned to demonstrate their sustainability leadership, which can be crucial in accessing sustainable finance and attracting stakeholders who value long-term strategic foresight. In other words, industry best practices often set the standard for what is considered good sustainability performance. Also, aligning with industry peers can help companies identify and address risks and opportunities that are specific to their sector or industry. Ultimately, stakeholders will continue to expect industry comparability, and companies that proactively align with best practices will strengthen their credibility and access to sustainable finance.
Misconception 3: “With less mandatory reporting, companies should scale back sustainability efforts.”
While the Omnibus proposal may reduce some regulatory burdens, it does not mean that companies should give up having a sustainability strategy altogether. True sustainability is about building a resilient and responsible business for the long term, and that goes beyond just ticking compliance boxes. Many companies recognise that strong sustainability performance is a powerful competitive advantage, attracting investors and customers who are increasingly prioritising these factors. Moreover, proactively building a robust sustainability strategy will ensure that companies are prepared for the changing regulatory landscape and avoid future disruptions. Ignoring sustainability is simply not an option in today’s world.
Final considerations
As the sustainability regulatory landscape continues to evolve, it presents not just challenges but immense opportunities for forward-thinking companies. Those that recognise the strategic value of sustainability and integrate it into their core business strategy will retain a competitive advantage. While reporting requirements may shift, sustainability remains a critical, non-negotiable factor for investors, consumers, and partners alike. Companies that enhance their sustainability strategy, such as through voluntary reporting, transition planning, or alignment with global frameworks, will not only build resilience and foster innovation but also secure long-term value creation. Rather than waiting for regulatory certainty, businesses must act now to future-proof their sustainability efforts and solidify their leadership in an increasingly ESG-driven world.
