Author: George Mangion - Senior Partner at PKF Malta

We live in a world with growing challenges such as climate change, artificial intelligence, imposition of trade tariffs and geopolitical tensions . In order to thrive, in this new landscape, we need to ensure that Europe is a place where growth and innovation can continue to be fostered. Hence on 11 February , the Commission has unveiled two major legislative bills—OMNIBUS 1 and 11, aimed at reducing regulatory burdens, improving sustainability rules, and unlocking investment. To help speed up a strong economic recovery, the EU needs to foster a favourable business environment and ensure that companies are not stifled by excessive regulatory burdens. This, in turn, will enable our businesses to grow and create quality jobs, attract investments and get the necessary funds for their transition towards a more sustainable economy and help the EU meet the Green Deal's ambitious objectives. Naturally, the real solution can only succeed if we get the balance right.

Quoting Stephane Sejourne (executive Vice-President for Prosperity and Industrial Strategy) she said; “We are taking concrete steps to cut red tape and make EU rules more accessible and effective for citizens and businesses. Omnibus  packages are the first step of our far-reaching simplification efforts across all sectors of legislation. We can show that Europe is not only an incredible market to invest, produce, sell and consume but also a simple market. This proposal delivers real simplifications—less administrative burden, easier access to funding, and clearer, more predictable rules. We shall  keep our objectives but change the way to better achieve them.” Unleashing a Competitiveness Compass ,this sets the vision for strengthening the EU's competitiveness and making the EU's economy more prosperous. Naturally ,we need to build on recommendations of the Draghi report published last September. Naturally, in order to boost competitiveness and unleash growth, the EU also needs to foster a favourable business environment and ensure that companies are not stifled by excessive regulatory burdens.

This, in turn, will enable businesses to grow and create quality jobs, attract investments and get the necessary funds for their transition towards a more sustainable economy and digital future. All this helps the EU meet the Green Deal's ambitious objectives. That is why the Commission is now recalibrating some EU rules in a growth-friendly manner that will enable more cost-effective delivery of existing policy objectives. The Commission has a clear target to deliver an unprecedented simplification effort, by achieving a minimum 25% reduction in administrative burdens and at least 35% for SMEs before the end of the mandate. SMEs (with the exception of listed SMEs) are currently out of the scope of CSRD. However, in practice, many of them are subject to sustainability information requests when they are included in the value chain of larger companies or from financial institutions, such as banks, which fall within the scope of CSRD.

Readers may ask what changes being proposed in number one Omnibus package.

• A proposal for a Directive amending the CSRD and the CSDDD;
• A proposal which postpones the application of all reporting requirements in the CSRD for companies that are due to report in 2026 and 2027 (so-called wave 2 and 3 companies) and which postpones the transposition deadline and the first wave of application of the CSDDD by one year to 2028.
• A draft Delegated act amending the Taxonomy Disclosures and the Taxonomy Climate and Environmental Delegated Acts  subject to public consultation.
• A proposal for a Regulation amending the Carbon Border Adjustment Mechanism Regulation
• A proposal for a Regulation amending the Invest EU Regulation.

Companies across the EU – large and small – can benefit from the simplifications of the Omnibus proposals. If adopted and fully implemented as set out originally , the proposals are conservatively estimated to bring total savings in annual administrative costs of around EUR 6.3 billion and to mobilise additional public and private investment capacity of EUR 50 billion to support policy priorities. Such packages will also protect SMEs from excessive sustainability information requests that they receive when they are included in the value chains of larger companies or from financial institutions, such as banks, which fall in the scope of the CSRD and the CSDDD. All companies with up to 1,000 employees and 50 million turnover will be outside the scope of the CSRD. For the companies in scope (above 1,000 employees and 50 million turnover), the Commission will adopt a delegated act to revise and simplify the existing sustainability reporting standards . The proposed provisions in CSRD also create a derogation for companies with more than 1,000 employees and a turnover below EUR 450 million by making the reporting of Taxonomy voluntary, and also, put a stronger emphasis on transition finance by introducing the option of reporting on partial Taxonomy-alignment. Companies outside the scope of CSRD (companies with up to 1,000 employees) may choose to report voluntarily on the basis of a simplified voluntary standard to be adopted by the Commission, based on the voluntary standards for SMEs (VSME) developed by EFRAG. The Commission estimates that the proposal will reduce the number of companies in scope by 80%. 

It shall change the rules to exclude around 182,000 the 200,000 importers currently covered, on the grounds that they produce only 1% of emissions in the scheme. It shall do this by only applying CBAM to companies importing goods weighing more than 50 metric tons per year. The existing rules cover all imports of CBAM-covered goods with a value above 150 euros. However, rather than a mere simplification, this reform represents a significant reduction in the sustainability reporting requirements for companies. Similarly, while SMEs and SMCs are not subject to any obligations under the CSDDD, they can be indirectly impacted when large companies need to request information from them to comply with their due diligence obligations.  The proposal will limit the general requests for information for impact mapping that large companies in scope may address to SMEs and SMCs (small midcap companies with up to 500 employees) to information specified in the VSME standard. To allow businesses more time to adapt, compliance deadlines have been postponed. Companies with 250 to 999 employees now have an additional two years before they must adhere to CSRD reporting obligations, while CSRD was extended by one year. Despite these adjustments, questions remain about any long-term implications. Critics argue that loosening requirements may hinder regulatory harmonization across the EU and reduce corporate transparency, potentially undermining the bloc’s leadership in sustainability initiatives. In summary, the effectiveness of these changes will largely depend on how diligently and cohesively do member states implement them.