“This is a major step forward in creating a more favourable business environment to help EU companies grow, innovate, and create quality jobs,” it said.

The European Commission has a clear target to deliver an unprecedented simplification effort, by achieving at least 25% reduction in administrative burdens, and at least 35% for SMEs until the end of this mandate. These first ‘Omnibus’ packages bring together proposals in a number of related legislative fields and cover a far-reaching simplification in the fields of sustainable finance reporting, sustainability due diligence, EU taxonomy, carbon border adjustment mechanism, and European investment programmes.

The European Commission said the proposals are conservatively estimated to bring total savings in annual administrative costs of around €6.3bn ($6.61bn) and to mobilise additional public and private investment capacity of €50bn to support policy priorities.

What are the key changes under the EU Omnibus package?

The main changes are in the areas of sustainability reporting (CSRD and EU taxonomy) and will:

• Remove around 80% of companies from the scope of CSRD, focusing the sustainability reporting obligations on the largest companies which are more likely to have the biggest impacts on people and the environment

• Ensure that sustainability reporting requirements on large companies do not burden smaller companies in their value chains

• Postpone by two years (until 2028) the reporting requirements for companies currently in the scope of CSRD and which are required to report as of 2026 or 2027

• Reduce the burden of the EU taxonomy reporting obligations and limit it to the largest companies (corresponding to the scope of the CSDDD), while keeping the possibility to report voluntarily for the other large companies within the future scope of the CSRD. This is expected to deliver significant cost savings for smaller companies, while allowing businesses that wish to access sustainable finance to continue that reporting

• Introduce the option of reporting on activities that are partially aligned with the EU taxonomy, fostering a gradual environmental transition of activities over time, in line with the aim to scale up transition finance to help companies on their path towards sustainability

• Introduce a financial materiality threshold for the taxonomy reporting and reduce the reporting templates by around 70%

• Introduce simplifications to the most complex “do no significant harm” (DNSH) criteria for pollution prevention and control related to the use and presence of chemicals that apply horizontally to all economic sectors under the EU taxonomy – as a first step in revising and simplifying all such DNSH criteria.

• Adjust, among others, the main taxonomy-based key performance indicator for banks, the Green Asset Ratio (GAR). Banks will be able to exclude from the denominator of the GAR exposures that relate to undertakings which are outside the future scope of the CSRD (i.e. companies with less than 1000 employees and €50m turnover).

The main changes in the area of sustainability due diligence will:

• Simplify sustainability due diligence requirements so that companies in scope avoid unnecessary complexities and costs, e.g. by focusing systematic due diligence requirements on direct business partners; and by reducing the frequency of periodic assessments and monitoring of their partners from annual to five years, with ad hoc assessments where necessary

• Reduce burdens and trickle-down effects for SMEs and small mid-caps by limiting the amount of information that may be requested as part of the value chain mapping by large companies

• Further increase the harmonisation of due diligence requirements to ensure a level playing field across the EU

• Remove the EU civil liability conditions while preserving victims’ right to full compensation for damage caused by non-compliance, and protecting companies against over-compensation, under the civil liability regimes of Member States

• Give companies more time to prepare to comply with the new requirements by postponing the application of the sustainability due diligence requirements for the largest companies by one year (to 26 July 2028), while advancing the adoption of the guidelines by one year (to July 2026).

Unlocking investment opportunities

The EU Commission is also proposing a series of amendments to simplify and optimise the use of several investment programmes including InvestEU, EFSI, and legacy financial instruments.

InvestEU, the EU’s largest risk-sharing instrument to support priority investments within the Union, plays a key role in addressing financial barriers and driving the investments needed for competitiveness, research and innovation, decarbonisation, environmental sustainability and skills. Currently, close to 45% of its operations are supporting climate objectives.

How has the fashion sector reacted to the Omnibus package announcement?

The announcement has sparked fierce backlash from the global textile and fashion sector, along with worker rights organisations with concerns that the EU Omnibus will reduce the impact of the CSDDD.

“Lower level playing field could emerge, companies could abandon green efforts”

Elisabeth von Reitzenstein, Cascale’s senior director, public affairs, said the CSDDD has already been “significantly diluted from earlier drafts.”

“With the EU now set to weaken the rules and narrow the scope even further, we risk undermining years of progress in improving labour practices, reducing environmental harm, and driving decarbonisation. A lower level playing field could emerge, where companies that are not prioritising sustainability gain a competitive advantage. More concerning is the message this sends to the market: Effective sustainability reporting and due diligence measures are no longer a priority, potentially allowing businesses to scale back or abandon sustainability efforts altogether.”

Reitzenstein urged the EU Parliament and Council to do the right thing: “Raise their heads above the noise and approve robust and meaningful sustainability legislation.”

“While we understand that the legislative process often involves compromise, we strongly urge these institutions to not only reject any further weakening but also regain some of the initial ambition of the legislation. The future of sustainable business practices in Europe depends on them maintaining ambitious, enforceable rules. It is vital that the EU holds firm and continues to push forward the progressive policies we need to address global environmental and social challenges.”

While the EU Omnibus proposal is “deeply disappointing”, Reitzenstein said organisations must continue implementing these frameworks and strive to be more ambitious, particularly on supply chain due diligence and climate risk reporting.

“The EU and US, despite some progress, still lag behind in achieving the necessary pace and consistency in regulations that tackle the global climate crisis. Cascale strongly advocates for a coordinated and accelerated approach across both jurisdictions. We cannot afford to wait for piecemeal regulations when global action is urgently needed.

“The message to fashion brands and suppliers is clear: Stay committed to sustainability. Whether or not the regulatory environment strengthens or weakens, responsible practices will ultimately be rewarded. Companies that invest in sustainability today will be better positioned in the future. This means ensuring robust due diligence processes, aligning with international sustainability standards (such as the OECD Guidelines, UNGPs, and ILO conventions), and staying ahead of regulatory requirements.

“Transparency and traceability will be key, as both regulators and consumers demand greater accountability. Now is the time to double down on sustainability, not scale back. Brands must collaborate with industry experts and multi-stakeholder initiatives (MSIs) to ensure they are not only compliant but also contributing to meaningful global change.”

Changes go “far beyond simplification”

A statement from the Global Organic Textile Standard (GOTS) read: “Global Standard views the recently published European Commission Omnibus package as a step backwards in the pursuit of a more sustainable EU as the cornerstone of the Green Deal. Removing around 80% of companies from the scope of the Corporate Sustainability Reporting Directive (CSRD), postponing its reporting requirements and introducing substantial changes to the Corporate Sustainability Due Diligence Directive (CSDDD) goes far beyond simplification. By weakening social and environmental norms applying to companies, the Omnibus package is penalising those economic actors, such as the more than 15,000 GOTS-certified facilities, that are convinced and have proven that long-term sustainability and competitiveness go hand in hand. The proposed amendments also discourage investors – when investments in sustainable technologies are needed more than ever.

“In addition, at a time when consumers are most interested in the social as well as the environmental impact of supply chains, watering down the CSDDD’s requirements is disheartening. This move may lead to further environmental damage, corporate human rights violations and business as usual, further reinforcing power imbalances.”

Farmer livelihoods at risk

“The EU Commission presented its Omnibus package, proposing sweeping changes to key legislation that was meant to ensure corporate accountability, in particular the Corporate Sustainability Due Diligence and Reporting directives (CSDDD and CSRD). If adopted, these drastic changes would effectively reduce CSDDD to paperwork without impact,” argued Bindu S., CEO Fairtrade Network of Asia Pacific Producers.

The organisation together with Fair Trade Advocacy Office, Fairtrade International and Rainforest Alliance, is calling on the co-legislators to preserve the core elements of the CSDDD to ensure it delivers meaningful improvements to the living and working conditions for millions of smallholders and workers across the globe.

“A CSDDD without civil liability and reduced fines for wrongdoings leaves farmers and their families with little. Companies often disengage and switch suppliers rather than co-invest in solutions that build resilience within supply chains. Meanwhile, meaningful stakeholder engagement is further limited, reinforcing power imbalance. What does this leave for farmers?” added Bindu.

Original objective for responsible corporate behaviour “eliminated”

Meanwhile, Solidaridad, said it was deeply concerned by the proposed adjustments, adding that limiting corporate responsibility to direct partners will eliminate the original objective to foster responsible corporate behaviour across global value chains and replace it with an exercise where potential positive impacts are annihilated.

“The CSDDD as agreed before, explicitly recognises the specific challenges faced by the 600m smallholder farmers around the world, who produce the majority of the world’s coffee, cocoa, cotton, bananas, rice, tea and other vital commodities. Moreover, living wage and living income were also recognised as human rights that companies need to consider in their due diligence. The Commission now proposes changes that will undermine these essential parts of the CSDDD. Smallholders are the first to suffer from the triple planetary crisis, and their exposure to these risks will only exacerbate without levelling the playing field through landmark legislation.

“Further, the removal of civil liability and allowing only recourse to national law tort mechanisms, would not only weaken the implementation of the CSDDD, but also deprive rightsholders – especially from the Global South – of accessing justice. These provisions had been agreed by all co-legislators, as forming essential parts of effective and impactful due diligence.

“This proposal is not aligned with longstanding due diligence standards like the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the OECD guidelines, but also risks abandoning the opportunity provided by the CSDDD to enhance long-term economic security. Whereas the European Commission claims its proposed changes aim to reduce bureaucracy while maintaining their impacts, the proposal risks leading to the opposite. Paperwork would remain, but it would not help meaningfully address human rights and environmental risks in supply chains, ultimately leaving the Directive ineffective.”

Workers betrayed

The Clean Clothes Campaign said the EU Commission had “bowed to big business and betrayed workers.”

It warned the changes proposed reduce the number of companies covered by the law, re-define the value chain scope, asking companies only to check their immediate suppliers, and weaken judicial and administrative enforcement procedures.

“The text just tabled disproves previous statements by the Commission reassuring that simplification is not de-regulation. Clearly, the new trend in Europe is marching to the tune of big business, even at the cost of undoing the Union’s own laws,” said Muriel Treibich, lobby and advocacy coordinator for the Clean Clothes Campaign.

Kalpona Akter, founder of the Bangladesh Center for Workers Solidarity, added: “Human rights and environmental due diligence is useless to workers if it is toothless. The workers who make clothes for European brands were counting on the EU to provide credible avenues to remedy the abuse by fashion brands they have to endure every day. By scrapping enforcement procedures, the EU is telling big companies that violating workers’ rights is an acceptable business model”, she added.

With the proposal now under discussion by the EU Parliament and Member States, Giuseppe Cioffo, corporate accountability coordinator at the Clean Clothes Campaign, added: “The process leading to this Omnibus so far has made a mockery of EU law-making and democratic principles. We urge Members of the European Parliament and Member States to put labour and human rights before profit, and to bring the text of the proposal in line with what was originally agreed.” 

“Trojan horse for aggressive deregulation”

Meanwhile, the European Environmental Bureau (EEB) warned by “gutting essential sustainability laws,” the EU Commission is pushing Europe backward at a time when stronger business responsibility is urgently needed.

Faustine Bas-Defossez, director for nature, health and environment at the EEB, said: “It is now clear that ‘simplification’ is just a Trojan horse for aggressive deregulation. The EU Omnibus Simplification Package isn’t just an attack on corporate environmental accountability, it’s a blow to democracy. In just four months, the Commission has rewritten agreed EU rules without any democratic process, impact assessment, or consultation. All without a shred of evidence that these yet-to-be-implemented rules would harm competitiveness. What this package does create, however, is legal uncertainty, rewarding laggards while penalising companies that were moving early to monitor and report their environmental impact.”

Clear CSDDD guidelines must remain a priority

While the Federation of Sportswear Industry (FESI) largely welcomed the announcement to cut red tape, it said it was crucial regulatory changes avoided new legal obligations that could increase compliance costs.

“At the same time, the development of clear CSDDD guidelines and compliance tools must be accelerated to ensure businesses have the necessary resources to meet upcoming requirements.”, commented FESI secretary general Jérôme Pero.

FESI said the sporting goods industry currently faces significant operational burdens due to the rise in reporting requirements, which demand considerable time, financial resources, and data management efforts for companies. The expanding number of reporting data points has also created a costly and complex compliance landscape, particularly affecting SMEs, where resources spent on reporting detract from sustainability initiatives and core business functions.

To ensure that the industry’s transition toward greater sustainability remains both achievable and proportionate — particularly for small businesses, which represent nearly 75% of FESI members — FESI has outlined the following recommendations to the EU Commission and co-legislators in its latest position paper:

1. Avoiding new legal obligations: While streamlining rules is essential, it is vital to avoid expanding legal obligations or introducing substantial changes that could disrupt business operations. Regulatory adjustments should focus on reducing administrative burdens and clarifying existing frameworks. Simultaneously, developing compliance tools and guidelines on the Corporate Sustainability Due Diligence Directive (CSDDD) must remain a priority to help businesses adapt effectively

2. Involving industry in consultations: Industry stakeholders, including sporting goods companies, should be consulted at every stage of the legislative process to ensure adopted legislations are realistic and workable. With extensive and long-term expertise in supply chains and circular economy practices, the sporting goods sector can offer valuable insights — particularly in textiles and footwear

3. Ensuring consistent implementation: Harmonised regulations are essential to maintaining a level playing field. Inconsistent requirements risk creating competitive imbalances and undermining supply chain transparency. Predictable and uniform standards will help all companies comply with sustainability rules.

“We need to keep the EU market and EU companies competitive. After proposing and implementing several dozens of new sustainability laws over the past years, the European Commission needs to focus now on reviewing and simplifying the enforced legislation. The goal must be to reduce excessive administrative burden and eliminate overlaps between different laws. Rules need to be practical and support competitiveness”, commented Diego Antončić, chair of the FESI Corporate Responsibility Committee.

 

By Just Style