The Omnibus Package: A game-changer for sustainability compliance in financial services

The EU’s newly released Omnibus Package introduces significant changes to corporate sustainability reporting and due diligence obligations, with the potential to fundamentally reshape the compliance landscapes for banks, insurers, pension funds, and asset managers. Experts from ACE + Company outline the changes being rolled out and their implications.

While still under review, the Omnibus package aims to reduce costs, streamline processes, and align regulations with business competitiveness within the EU. These reforms reflect a shared goal of making compliance simpler and more effective.

As of February 27, 2025, the proposal has not been finalized and requires approval from both the European Parliament and EU member states. It is currently progressing through the standard legislative process, involving multiple readings and negotiations among EU institutions. While the exact timeline remains uncertain, a revision of the ESRSs is anticipated within six months.

CSRD Overhaul

The overhaul of the CSRD will see fewer companies fall within the scope of the regulation:

• Scope Shrinkage: Originally, the Corporate Sustainability Reporting Directive (CSRD) applied to 49,000 companies. The Omnibus Package, while still a proposal, cuts coverage by 80%, now focusing on only 10,000 of the largest corporations with over 1,000 employees.
• Massive Cost Reductions: If adopted, the revised framework is estimated to deliver €6.3 billion in annual savings, of which €4.9 billion in relief for 39,000 companies that would be fully exempted from reporting; and €1.4 billion in streamlined costs for the 10,000 companies still in scope, due to simplified disclosures and fewer reporting obligations.
• Narrative Data Points Reduced: Many qualitative reporting requirements will be scaled back, shifting the focus to quantitative data points, which are more easily automated. This transition creates an opportunity for leveraging smart technology to enhance efficiency, but never at the expense of the integrity of climate and social commitments.
• Regulatory Alignment: The CSRD now closely aligns with the Corporate Sustainability Due Diligence Directive (CSDDD) thresholds, minimizing overlapping burdens.

CSDDD: A More Manageable Framework

The Corporate Sustainability Due Diligence Directive (CSDDD) will undergo critical modifications:

• Extended Timeline: Compliance deadlines shift from 2027 to 2028, giving companies an additional year to prepare.
• Harmonised Due Diligence Requirements: Due diligence duties are limited to direct suppliers, unless evidence suggests material ESG risks further down the chain.
• Extended Due Diligence Reassessment Period: Instead of annual assessments, businesses will now only be required to conduct due diligence every five years.

How Financial Institutions are Affected

For financial institutions, these regulatory adjustments carry significant implications:

• ESG Due Diligence Shifts: With fewer companies required to report, financial institutions must rethink how they assess sustainability risks in investment portfolios and corporate lending. From a banking standpoint, this shift reshapes how value chains are included in risk assessments and lending decisions, requiring a reassessment of ESG integration strategies.
• Harmonized Value Chain Due Diligence: The proposed alignment between the CSRD and CSDDD raises important questions about which parts of the value chain should be integrated into the due diligence process. With the focus shifting to direct suppliers under CSDDD, reporting efforts could be significantly reduced, unless material risks indicate potential harm further up or down the value chain.
• New Opportunities in Green Finance: Despite the scaling back, the EU-level private funding tool InvestEU intends to unlock €50 billion in new public and private investment, offering financial institutions potential gains in green bonds, sustainability-linked loans, and impact investing.

Summary

The European Commission’s Omnibus Package is not just about reducing red tape, it’s about redefining how businesses and financial institutions approach sustainability, risk management, and regulatory efficiency.