Insights 2025.03.05

Commentary on the European Omnibus Draft: Major Relaxation of Sustainability Regulations and Its Impact

Director of Zeroboard Research Institute Director of the Global Sustainability Standards Board (GSSB)

Tomoo Machiba

In our previous Insight ( Corporate Responses Under the New US Administration: The Challenge of Decarbonization and Evolution of ESG Strategies ), we introduced the "Draghi Report," published in September 2024 by Mario Draghi, former Prime Minister of Italy and President of the European Central Bank, which aimed to strengthen the competitiveness of the European Union (EU), and recommended a 25% reduction in disclosure obligations, including those for the Corporate Sustainability Reporting Directive (CSRD), and a 50% reduction for small and medium-sized enterprises. *1) In response to this, work was underway to compile the CSRD, the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy into an "Omnibus Package," and a draft of this was made public on February 26, 2025. *2)

The relaxation of sustainability disclosure regulations through the omnibus format was much more Contents than experts had expected. Below is a quick summary of the changes. The draft also includes changes to carbon border adjustment measures (CBAM).

CSRD

The disclosure obligations for companies, which were scheduled to be imposed in 2026 and 2027, have been postponed by two years.
The law will be limited to large companies with balance sheets exceeding 25 million euros, sales exceeding 50 million euros, and employing more than 1,000 people, reducing the number of companies eligible for the law by 80%.
For companies with fewer than 1,000 employees, the company offers voluntary disclosure standards with significantly reduced data requirements.
Reduce the number of data points in the European Sustainability Reporting Standard (ESRS) and clarify unclear disclosure requirements. Stop Create sector-specific disclosure standards.
Reduce the burden of third-party guarantees.
The application of the principle of double materiality is maintained.

CSDDD

Due diligence is limited to direct suppliers.
Requiring supplier audits every five years instead of annually.
Eliminate civil liability items to avoid huge compensation costs. Compensation for victims of non-performance is guaranteed.
The first phase of application has been postponed by one year to 2028.

EU Taxonomy

The reporting obligation is limited to the scope of the CSDDD (more than 1,000 employees and annual global net sales of 450 million euros or more - non-EU companies must have annual net sales within the EU of 450 million euros or more). Other companies will be able to voluntarily collaborate on the taxonomy.
Introducing the option for partial taxonomy integration.
Reduced the number of data points in reporting templates by approximately 70%.
Excludes reporting of activity that have a 10% or less impact on sales, capital expenditures, or total assets.
Simplify the "Do Not Cause Significant Hazard" (DNSH) standards for pollution prevention and control surrounding the use and storage of chemical products.
Banks can exclude companies that fall outside the scope of the CSRD from the Green Asset Ratio (GAR: investments in taxonomy-compliant activity as a percentage of total assets).

CBAM

Small and medium-sized individual importers, which account for approximately 90% of imports with annual import volumes of less than 50 tons, will be exempt from the law.
The start of implementation has been postponed by one year to 2027.
Simplify permit procedures and embedded emission amount calculation and reporting requirements.
It is proposed to expand the scope of applicable items in early 2026.

European companies, which have been concerned about the impact on their competitiveness in the global market, and non-European companies, including Japanese companies, which have been forced to comply with EU regulations, are likely breathing a sigh of relief. However, many are already criticizing this as deregulation rather than simplification. Robin Hodes, the new CEO of the Global Reporting Initiative (GRI), of which I serve on the Global Reporting Standards Board (GSSB), issued a statement saying, "Reducing the ambition of the CSRD goes against strengthening competitiveness. Sustainability information will play a key role in accelerating innovation and attracting investment to Europe." *3)

However, the disclosure obligation for large companies has been largely maintained, and it is still essential for Japanese companies to pay close attention to these disclosure regulations. The draft will now be submitted to the European Parliament and the European Council for deliberation, and heated debate will likely ensue over its adoption. We will report on the impact of the omnibus sustainability disclosure regulations as it becomes clearer.

throughout the supply chain
GHG emission amount calculation/visualization,
For centralized management of environmental items
Zeroboard

For detailed information and Contact us about the entire Service ,
Please check here.

*1) Japan External Trade Organization, September 19, 2024, "Former ECB President Draghi releases report to strengthen EU competitiveness, recommends issuing massive EU joint bonds": https://www.jetro.go.jp/biznews/2024/09/14e4bbe4f128296e.html
*2) European Commission, Commission simplifies rules on sustainability and EU investments, delivering over €6 billion in administrative relief, press release, 26 February 2025, https://ec.europa.eu/commission/presscorner/detail/en/ip_25_614.
*3 )Global Reporting Initiative, Limiting CSRD is a backward step for EU sustainability, 26 February 2025, www.globalreporting.org/news/news-center/limiting-csrd-is-a-backward-step-for-eu-sustainability.

Article author

Tomoo Machiba(Director of Zeroboard Research Institute)
After working as a journalist for the Asahi Shimbun, he is now involved in supporting corporate and government sustainability strategies internationally. He worked on guideline revisions at the GRI International Secretariat and led eco-innovation policy research at the OECD's Directorate for Science, Technology and Industry. He is responsible for knowledge management of renewable energy technology data from around the world at the International Renewable Energy Agency (IRENA) and for developing strategies and policies for the green economy and climate change response at the UAE Federal Government. He served as Deputy Director of the United Nations Climate Technology Centre Network (CTCN), supporting technology transfer to developing countries, before returning to Japan in 2021. He served as a partner in charge of decarbonization and ESG at ERM, a foreign consulting firm, and became Director of Zeroboard Research Institute in August 2023. He has served as a director of the Global Sustainability Standards Board (GSSB), a GRI advisory body, since January 2024, and as a member of the GHG Protocol TWG since March 2025. He holds a B.A. in Journalism from the Faculty of Letters at Sophia University and a Master's degree from the School of International Development at the University of Sussex, UK.