Over the last decade, the EU has established the world’s most comprehensive sustainability framework. Through the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy, the Sustainable Finance Disclosure Regulation (SFDR), and the Corporate Sustainability Due Diligence Directive (CSDDD), Brussels aimed to raise corporate accountability while steering investment flows toward sustainable activities.

In 2025, however, the regulatory environment is undergoing a significant shift. The European Commission’s Omnibus Package proposes to reduce complexity, lower administrative burdens, and refocus obligations on the largest companies. The package represents a critical turning point: it seeks balance between ambition and competitiveness, but it also raises fundamental questions about whether the EU is simplifying or in fact deregulating its sustainability agenda.

The Current Framework:

• CSRD (2022/2464/UE): Expands sustainability reporting obligations to a wider set of companies, using the European Sustainability Reporting Standards (ESRS) and the principle of double materiality.
• ESRS (Delegated Act 2023/2772/CE): Defines mandatory disclosure requirements, aligned with global standards such as GRI, TCFD, and ISSB.
• EU Taxonomy (2020/852/UE): Establishes classification criteria for sustainable economic activities.
• CSDDD (2024/1760/UE): Introduces due diligence requirements on environmental and human rights impacts across corporate value chains.

This framework raised the bar globally but also generated pushback from businesses citing excessive reporting costs and complexity.

The Omnibus Package: Simplification or Deregulation?

In February 2025, the EC introduced the Omnibus Package, a set of proposals still under negotiation that aim to reduce reporting obligations and improve competitiveness, as follows.

• Narrowing CSRD’s Scope (Proposals):
  • Commission Proposal: Mandatory reporting only for companies with over 1,000 employees and either €50m turnover or €25m assets.
  • Council Proposal: Even stricter—companies must also meet a €450m turnover threshold.
  • Parliament Discussions: Some voices propose raising thresholds further, to 3,000 employees plus €450m turnover.
• Voluntary Standard for SMEs (VSME): A flexible and voluntary standard designed for non-listed SMEs, intended to help them communicate sustainability information to banks and larger value chain partners.
• Simplification of ESRS (Drafts): A reduction of ~57% in mandatory data points, elimination of sector-specific standards, and clearer distinction between mandatory and voluntary disclosures.
• “Stop the Clock” (Approved, April 2025): Postpones by two years the sustainability reporting obligations for companies in the second wave of CSRD implementation, giving them more time to prepare.
• “Quick Fix” (Approved, July 2025): Extends transitional exemptions for companies in the first wave. Requirements initially scheduled to apply in the second reporting year are now postponed, easing the administrative burden for early reporters.
• Taxonomy Adjustments (Proposals): Reporting narrowed to the largest firms (≥1,000 employees and ≥€450m turnover), with a 10% materiality threshold allowing exclusion of non-essential activities.

The Commission argues that these reforms simplify reporting while preserving climate ambition. Yet, many experts question whether this package weakens the EU’s sustainability framework. Rather than simplification, it risks becoming a deregulation effort in the name of competitiveness. The proposals also create a growing gap: very large firms remain legally bound, while smaller ones are exempt from direct obligations but will still face pressure from investors and supply chain partners to provide data, disclose GHG emissions, and adopt transition plans.

For certain large corporations, compliance will remain mandatory, though less administratively burdensome. They must continue implementing comprehensive ESG strategies, embedding due diligence in supply chains, and reporting under CSRD and CSDDD.

For some large companies and SMEs, the exemption from mandatory rules might seem like relief. However, the market reality is different: larger clients and financial institutions are expected to require sustainability data through the voluntary VSME standard. Thus, even without legal compulsion, some large companies and SMEs will be drawn into the reporting ecosystem.

Thus, regulatory exemptions do not shield companies from sustainability demands. Market-driven pressures are accelerating and will ultimately compel voluntary alignment.

The Omnibus Package also carries geopolitical weight. By reducing compliance burdens, the EU seeks to strengthen industrial competitiveness and ensure fairer competition with markets such as the U.S. At the same time, Brussels has reassured transatlantic partners that sustainability standards will not become trade barriers.

For European—and Romanian—companies, the road ahead is clear:

• Regulation is not the only driver. Even in the absence of binding obligations, supply chains, investors, and customers will demand transparency.
• Sustainability is a competitive advantage. Companies that invest in ESG practices now will be better positioned to attract capital, secure contracts, and manage risk.
• Voluntary compliance is strategic. Those who fail to adapt risk exclusion from global value chains.

Conclusion

The EU’s sustainability regulation is entering a new phase. The Omnibus Package promises relief for companies, but its long-term effect is contested: does it empower competitiveness or dilute ambition?

As Mihaela Croitoru, CEO and Sustainability Advisor at Sustainability Lens, emphasizes: “European and Romanian companies must understand that market pressures on sustainability will only intensify. Even if legislation narrows in scope, the value chain will impose expectations for disclosure, transition planning, and ESG alignment. Sustainability is no longer just compliance—it is a strategic investment and a source of competitive advantage.”

In other words, the simplification of rules should not be mistaken for a weakening of responsibility. The true test for companies is whether they will seize sustainability as a lever of resilience and growth, or whether they will lag behind in an increasingly demanding global market.