The EU’s Omnibus Saga Enters a New Phase of Uncertainty

The European Union’s push for simplification under the so-called Omnibus I package has hit a political inflection point. The compromise text put forward by the Legal Affairs Committee (JURI) was narrowly rejected by the European Parliament, sending the entire proposal back for a full vote on November 13.

What does this mean for the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) – the cornerstones of the EU’s sustainability framework?

The Road to Rejection

What initially began as a technical revision to reduce the administrative burden has evolved into a profound debate about the very future and ambition of European sustainability regulation. The rejection, driven by concerns that the compromise went either too far in weakening the rules or not far enough in other areas, significantly increases volatility and uncertainty over the final legislative outcome.

The European Commission proposed the Omnibus package in February as part of its simplification agenda to boost the EU’s competitiveness and reduce compliance burdens on companies, especially SMEs.

By early summer, the Council of the EU had expressed support for the stop-the-clock mechanism but introduced changes to the scope. Specifically, the Council pushed to raise the threshold for the CSDDD to cover only companies with 5,000 employees (up from the 1,000-employee initial proposal) and changed a turnover threshold for the CSRD. Within the European Parliament, lawmakers had been sharply divided on how the EU sustainability rules should apply. Left-leaning parties pushed for smaller cuts to the regulations, while the far-right countered that the CSRD and CSDDD should be abandoned altogether.

When the compromise text – that retained the CSRD’s 1,000-employee scope but added a €450 million revenue threshold, while increasing the threshold of the CSDDD to cover only companies with 5,000 employees and more than €1.5 billion in revenues – reached the plenary in October, opponents successfully argued that it was a step backward in transparency and accountability, leading to another round of negotiations in November.

A Test for the EU

With the European Parliament’s negotiating position now rejected, the immediate concern is that the final trilogue negotiations will be delayed, making a timely deal before the end of 2025 unlikely. This delay is more than a procedural setback; it’s a test of the EU’s ability to link competitiveness with accountability. 

Relaxing compliance thresholds risks excluding thousands of companies whose supply chains significantly impact climate and human rights outcomes. Hundreds of thousands of their suppliers would also fall out of scope, losing access to the capacity-building, training and financial support, often provided through compliance partnerships. This creates a dangerous governance gap where the riskiest, yet smallest, suppliers may be left unsupported. The political debate, therefore, risks undermining the collaborative outcomes that the sustainability rules were meant to foster.

For many, the political volatility is a signal to “wait and see,” potentially leading to a pause in investment in reporting and due diligence efforts. Our message is the opposite: The instability of the law is a call for the stability of your strategy. Market pressure from investors, consumers, and civil society demanding transparent and comprehensive ESG performance will accelerate faster than any political agenda.