EU sustainability omnibus proposal to streamline CSRD and CSDDD

The CSRD, CSDDD, and EU Taxonomy Regulation are set to change, under the new omnibus proposal. In this article, sustainability and ESG expert Marion Kerestedjian provides some context to behind the omnibus proposal and how this is likely to impact reporting requirements for EU companies, as well as global companies looking to trade in the EU.

On 8 November 2024, European Commission President Ursula von der Leyen suggested during a press conference that the EU may consider consolidating three of its key sustainability directives — the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy Regulation, and the Corporate Sustainability Due Diligence Directive (CSDDD) — into a single omnibus package. She said this initiative would aim to streamline sustainability reporting obligation and reduce administrative burden for companies.

Understanding the EU omnibus concept

In the European Union, an “omnibus” regulation serves as a legislative tool to amend, consolidate, or align multiple existing regulations or directives into a single legislative act. This approach addresses inconsistencies, enhances legislative efficiency, and ensures coherence across Member States. By unifying various legislative instruments, the EU Commission can simplify the legal framework, making it more accessible and reducing administrative complexities for stakeholders.

Historical precedents of omnibus regulation

The EU has previously employed omnibus regulation to modernize and enforce consumer protection laws. A notable example is Directive (EU) 2019/2161, known as the “Omnibus Directive,” adopted on 27 November 2019. This directive amended four existing consumer law directives:

• Unfair Contract Terms Directive (93/13/EEC)
• Price Indication Directive (98/6/EC)
• Unfair Commercial Practices Directive (2005/29/EC)
• Consumer Rights Directive (2011/83/EU)

The Omnibus Directive aimed to strengthen consumer rights by modernizing EU consumer protection rules, enhancing enforcement measures, and increasing transparency requirements. It addressed challenges arising from digitalization and new market developments, ensuring that consumer protection kept pace with evolving business practices.

Intention, not yet policy or regulation

The primary goal of an EU omnibus regulation is to streamline and harmonize existing laws, but the outcome can vary. In the case of the 2019 Omnibus Directive, rather than merely simplifying regulations, it introduced additional obligations for businesses, especially those operating online and offering digital services. For instance, it expanded the scope of consumer rights to cover digital goods and services, imposed stricter transparency requirements, and strengthened enforcement mechanisms.

While an omnibus regulation consolidates multiple directives, it doesn’t necessarily result in a reduction of regulatory requirements. Instead, it can lead to a more comprehensive and cohesive legal framework that addresses contemporary challenges and enhances protections or obligations as deemed necessary.

The EU legislative process for omnibus regulation

The adoption of an omnibus regulation follows the EU’s ordinary legislative procedure to become EU law, involving several key steps:

1. Proposal application by the European Commission: The Commission drafts and submits a legislative proposal to both the European Parliament and the EU Council.
2. First reading:
   • European Parliament examines the proposal and may approve, reject, or suggest amendments to it.
   • European Council considers the EU Parliament’s position. If it agrees with the amendments, the act is adopted. If not, it adopts its own position and returns it to EU Parliament.
3. Second reading:
   • European Parliament reviews the council’s application. It can approve, reject, or propose further amendments.
   • Council of the European Union considers the amendments, if there are any. If it approves all Parliament’s amendments, the act is adopted. If disagreements persist, a Conciliation Committee is convened.
4. Conciliation: A committee comprising equal members from Parliament and the Council seeks to agree on a joint text. If successful, the text proceeds to a third reading. If not, the proposal fails.
5. Third reading: Both institutions vote on the joint text without further amendments. Approval by both results in adoption; rejection by either means the proposal does not become law.

This structured process ensures that both the European Parliament and the Council collaboratively shape legislation, reflecting the interests of EU citizens and Member States.

Next steps for the proposed sustainability omnibus regulation

As President von der Leyen’s announcement was made during a press conference it doesn’t constitute formal legislative action. However, should formal legislative action occur, the following steps are anticipated:

1. Formal proposal: The European Commission would need to draft and adopt a formal legislative proposal detailing the consolidation of the CSRD, EU Taxonomy Regulation, and CSDDD into an omnibus regulation.
2. Impact assessment: A comprehensive impact assessment would be conducted to evaluate the potential economic, social, and environmental effects of the proposed regulation.
3. Stakeholder consultation: Engagement with stakeholders, including businesses, civil society, and Member States, to gather feedback and build consensus.
4. Legislative deliberation: The proposal would undergo the ordinary legislative procedure, involving readings and potential amendments by both the European Parliament and the Council.
5. Adoption and implementation: Upon agreement, the EU omnibus package would be adopted and published. Member States would then be responsible for its implementation, adhering to the stipulated timelines.

What does the EU's simplification omnibus package mean for companies and stakeholders?

The proposed consolidation signifies the European Commission’s commitment to maintaining sustainability due diligence objectives while seeking to simplify compliance processes. For businesses, this could mean a more streamlined reporting framework, reducing redundancies and administrative burden. However, it’s essential to recognize that simplification doesn’t mean deregulation. The unified regulation may introduce new requirements to address emerging sustainability challenges.

Organizations should remain vigilant, monitor developments closely, and engage proactively in consultations to ensure that their perspectives are considered. By staying informed and adaptable, businesses can effectively navigate the evolving regulatory landscape and align with the EU’s sustainability ambitions.

At Enhesa, we’ll continue to monitor developments closely. Should any changes arise, we’ll promptly and accurately reflect them in our content to support our clients in maintaining compliance.