EU Draft Proposal: Drastic restrictions of CSRD, CSDDD, and EU Taxonomy

Last weekend, news agency Bloomberg gained access to leaked pages of the Omnibus proposal, which has since been widely discussed in policy circles. This proposal aims to reduce regulatory pressure on large companies by introducing significant changes to the CSRD (Corporate Sustainability Reporting Directive), CSDDD (Corporate Sustainability Due Diligence Directive), and the EU Taxonomy regulation. However, the proposed adjustments appear to significantly limit previously adopted sustainability laws.

Key Changes in the CSRD

1. Increase in the reporting threshold: Only companies with more than 1,000 employees and a turnover of more than EUR 450 million will remain subject to CSRD reporting requirements.
2. No mandatory reporting for publicly listed SMEs: Smaller publicly listed companies are exempted from the reporting obligation.
3. Targeted assurance guidelines: Assurance requirements will be eased through guidelines aimed at reducing the burden for limited assurance.
4. Limited information requests in the value chain: Companies will be required to request less information from their supply chain partners.
5. No sector-specific ESRS standards: No additional sectoral reporting standards will be introduced.
6. Reduced due diligence checks: The frequency of due diligence will be lowered from annually to once every five years.
7. Double materiality analysis remains unclear: There is no explicit mention of removing this requirement.
8. Implementation delay: The CSRD implementation will be postponed by one year, giving companies more time to comply with reporting obligations.

Proposals for the CSDDD

1. Limitation of due diligence to direct suppliers: Only companies with more than 500 employees will be subject to this obligation.
2. No last resort obligation: Companies are no longer required to terminate business relationships in cases of violations.
3. Narrowing the definition of stakeholders: Fewer stakeholders will be considered under the regulation.
4. Simplification of the due diligence process: Fewer steps and less frequent periodic obligations.
5. No due diligence obligations for financial institutions: Banks and investors are excluded from the guidelines.
6. Reduction of liability risks: The EU intends to abolish EU-wide liability rules, leaving liability to national laws.
7. Less frequent monitoring: Companies will only need to assess their suppliers once every five years instead of annually.

No mandatory termination of non-compliant supplier relationships: Companies are no longer required to end business relationships if violations are found.

Political resistance and potential consequences

The proposed changes face significant resistance within the EU. Green and center-left parties are expected to strongly oppose the weakening of sustainability regulations. Maria van der Heide, Head of EU Policy at NGO ShareAction, describes the proposal as ‘reckless’ and emphasizes that the rollback of sustainability laws is ‘pure deregulation.’

According to Usha Ganga (NBA), this proposal could have major consequences for companies preparing for CSRD reporting in 2025. “Many companies have already made significant investments to comply in time. If these relaxations go through, many companies will no longer be required to report under CSRD. Likewise, accountants specializing in CSRD assurance will find that some of their clients are no longer required to obtain assurance.

Strategic improvement and future outlook

Although the proposal is presented as a simplification, it can also be seen as a strategic improvement. Mid-cap companies will face less reporting burden, while core obligations for large enterprises remain intact.

Moreover, the rise of artificial intelligence presents an opportunity for companies already leveraging AI-driven reporting. These businesses will turn compliance into a competitive advantage, as automated processes enhance the efficiency and accuracy of sustainability reporting.

Furthermore, companies will continue to report on ESG, not just because of regulations, but because ESG is a strategic choice. Sustainable policies future-proof organizations, make them more attractive to customers and employees, and contribute to a healthier planet.

Although this remains a leaked draft proposal, it strongly indicates the potential direction the EU may take. The coming months will reveal how these proposals evolve and whether they will be implemented into legislation.

At RethinkRebels, we believe that businesses should not wait for legislation to dictate their sustainability strategy. Companies that proactively embed ESG into their core operations will continue to thrive—regardless of regulatory shifts. ESG is not just about compliance; it is a smart business move that strengthens your brand, attracts top talent, and ensures long-term resilience.

Want to know more about how these changes might impact your business? The European Commission is expected to propose the Omnibus Simplification Package on February 26, 2025. This proposal will then be reviewed by the European Parliament and the Council of the EU, which means we will have more clarity in just two days. Reach out to us today. And if you're looking for more insights, the leaked documents are available via Duurzaam Ondernemen—stay informed and stay ahead!

Contact us today to simplify CSRD compliance and take your first steps toward success!