On January 29, 2025, the first large-scale initiative was published at the beginning of the EU Commission's term: "An EU Compass to regain competitiveness and secure sustainable prosperity." (Press release of the European Commission of 29.01.2025).This strategy laid the groundwork for the structural regulatory relief we are seeing today.

With the "Competitiveness Compass", the Commission has presented a comprehensive strategy to strengthen Europe as a location for innovation, combine decarbonization with competitiveness and strengthen Europe's security and resilience.

The Simplification Omnibus packages serve as the primary legal instruments for this strategy. They streamline sustainability reporting by harmonizing the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CS3D/CSDDD), and the EU Taxonomy. The primary objective is to reduce regulatory complexity and administrative burden by at least 25%, significantly increasing Europe's global competitiveness.

2026 Legal Update: Following the initial proposal in early 2025, the Omnibus I Directive was officially finalized and published in the Official Journal. It entered into force in March 2026, codifying the higher 1,000-employee/€450M turnover thresholds and the 70% reduction in ESRS data points.

We have summarized the finalized details of this Omnibus package and its immediate impact on companies below.

What Are the Omnibus Packages?

The Omnibus Packages are the primary legal vehicles for the "Five Horizontal Factors for Competitiveness" under the EU Competitiveness Compass. Finalized in early 2026, these packages provide a structural overhaul of sustainability reporting to ensure EU decarbonization doesn't compromise global competitiveness. Their goal is to reduce recurring administrative costs by at least €37.5 billion.

The first omnibus package: these are the main changes

The EU Commission has finalized the first Omnibus simplification package, which officially entered into force in March 2026. The final law goes significantly further in reducing burdens than the original 2025 proposal.

Key points from the first Omnibus package are:

• No reasonable assurance for the audit: Currently, the audit of the CSRD report should be carried out with limited assurance. It was planned that the audit would be audited with reasonable assurance in future - this is now no longer the case.
• Restricted CSRD scope: The CSRD now applies only to EU companies with at least 1,000 employees AND over €450 million in net turnover. The previous "2-out-of-3" test (including balance sheet) has been replaced for most entities by this higher dual threshold.
• CSDDD (CS3D) Scope Overhaul: The Due Diligence Directive is now reserved for "Very Large" companies with 5,000+ employees AND €1.5 billion in net turnover.
• Upper limit for reporting on the value chain: Obligated companies are now legally prohibited from requesting information from SME business partners (<1,000 employees) that goes beyond the simplified Voluntary SME (VSME) standard.
• Voluntary reporting for SMEs: Companies with <1,000 employees that do not fall under the CSRD can voluntarily use a simplified standard to be developed by the EU Commission based on the voluntary SME standard (VSME).
• ~70% Reduction in ESRS Data Points The ESRS have been revised to focus on approximately 320 mandatory data points, prioritizing quantitative data and "scoping exercises" over exhaustive narrative reporting.
• No industry-specific standards: The requirement for sector-specific ESRS has been officially removed; these will now be provided only as non-binding guidance.
• Simplified reporting for the EU taxonomy: Reporting templates have been cut drastically for financial institutions. Companies with >1,000 employees but ≤ €450M turnover are now exempted from mandatory Taxonomy reporting.
• Delay of CSRD reporting by two years: 2nd and 3rd wave companies now have two more years. They do not have to report in accordance with CSRD until 2028 (2029) for 2027 (2028).

Further omnibus packages planned

While Omnibus I is now law, the Commission is currently implementing Omnibus II and III (2025–2026), focusing on:

Other packages currently planned, according to EU Compass, page 24 - 25 (with year):

• Revision of Standardisation (2026): Simplifying technical norms for SMEs
• European Business Wallet (2025/2026): A digital identity for companies to store and share "once-only" compliance data.

Important goals of the omnibus simplifications are:

• Proportional timetables: Companies are to be gradually introduced to the requirements to ensure smooth implementation.
• Reduced reporting requirements: A 25% reduction in reporting requirements is planned (35% for SMEs)
• Focus on relevant metrics: Focus on investor-relevant data and the most damaging economic activities.

Significant Impact of the Omnibus Simplifications on Companies (2026 Update)

The finalization of the Omnibus I Directive (EU 2026/470) in early 2026 has brought far more significant relief than originally proposed in 2025. By drastically narrowing the scope, the EU has effectively shifted the focus from "quantity" to "strategic quality" in sustainability reporting.

The "Great Scope Realignment"

The most immediate impact is the mass exemption of mid-sized companies.

• CSRD: The "bar" is now set at 1,000 employees and €450M turnover. An estimated 90% of companies that were originally preparing for CSRD are now exempt from mandatory reporting.
• CS3D (CSDDD): The scope for the Due Diligence Directive has been even more tightly restricted to "Very Large" entities with 5,000+ employees and €1.5BN turnover.

SME Protection: The "Value Chain Cap"

One of the most valuable 2026 updates is the Statutory Value Chain Cap. Large companies are now legally restricted from demanding extensive sustainability data from their SME partners (<1,000 employees). Suppliers now have a "Right to Refuse" any request that exceeds the simplified VSME standard, ending the "data-request fever" that characterized 2024 and 2025.

Reporting Relief: ~320 Data Points

Instead of the original 1,100+ points, the revised 2026 ESRS now focus on a streamlined set of approximately 320 mandatory data points.

• Priority on Quantitative Data: Narrative "fluff" has been reduced in favor of hard numbers.
• Audit Relief: The plan to move toward "Reasonable Assurance" has been postponed indefinitely. For 2026 and beyond, Limited Assurance (a less intensive audit) remains the legal standard, significantly lowering compliance costs for CFOs.

VSME: Report Voluntarily, Benefit Strategically

Despite the significant regulatory relief provided by the Omnibus I Directive (effective March 19, 2026), voluntary action is still a strategic option for competitive SMEs.

While you may no longer be legally required to report under CSRD, your large customers are still obligated to do so. The VSME (Voluntary SME) standard, finalized by EFRAG and adopted as a formal EU Recommendation in late 2025, is now the universal "language" for these requests.

Why voluntary reporting is your best 2026 strategy:

• The "Statutory Right" to Simplify: Under the 2026 Omnibus rules, if you have fewer than 1,000 employees, you have a legal right to refuse any data request from a customer that exceeds the VSME standard. Reporting voluntarily using VSME "locks in" your compliance and protects you from arbitrary, over-complex questionnaires.
• Preferred Supplier Status: As large corporations move toward the streamlined ESRS datapoint set, they are prioritizing low-risk partners who already have their VSME data ready.
• Banking & Credit Scores: EU banks have now fully integrated VSME modules into their lending criteria. A voluntary report can directly lead to better interest rates and faster "Green Loan" approvals.
• Preparation for the Future: The Omnibus package includes a "review clause" for 2031. Starting now with the simplified VSME module allows you to build data maturity without the stress of a mandatory legal deadline.

Ready to start? Don't let the shift from 1,100 to 320 data points catch you off guard. Sunhat’s collaborative proof platform keeps your evidence ready for every audit, investor request, and customer questionnaire.