The European Commission’s Omnibus
proposal
has sent waves of uncertainty through corporate sustainability departments.
While framed as a simplification, this proposed package significantly alters
key sustainability
regulations
including
CSRD,
CSDDD
and the EU
Taxonomy.
The revised scope and reporting delays might appear to ease the regulatory
burden, but the reality is more complex. Companies that slow down their ESG
efforts now risk falling behind.
Businesses that take a proactive approach, regardless of shifting regulations —
maintaining strong data collection practices, and showing true commitment to
positive impact — will strengthen their resilience and
competitiveness
in an increasingly complex, global economy. By embedding sustainability into
their core strategy, they will also be better prepared to manage multifaceted
risks and access value-creation opportunities via sustainable finance, such as
green bonds and sustainability-linked loans.
Crucially, the pressure from diverse stakeholders for companies to take
meaningful action, measure impact and disclose ESG performance is not only
intensifying but is now essential to financial stability, business
resilience
and long-term competitiveness.
The risks of waiting
The Omnibus proposal has created a patchwork of new thresholds, extended
deadlines and shifting expectations. The scope for mandatory reporting has
narrowed, exempting many previously included companies. Additionally, reporting
deadlines for certain firms have been postponed by two years. However, this
doesn’t mean sustainability reporting is fading into the background. In fact,
companies that scale back their efforts now could face costly consequences down
the road.
Legislative processes in the EU are notoriously slow and unpredictable. While
the Omnibus proposal is moving forward, its final adoption and national
implementation could take years. Meanwhile, 18 member states have already
transposed the existing CSRD into law, and enforcement is underway. Companies
that assume they are off the hook risk scrambling later to meet evolving
expectations. Moreover, investors, financial institutions and supply chain
partners continue to demand transparency on ESG performance, regardless of
regulatory changes.
Non-compliance with the CSRD is enforced at the national level, with each EU
member state determining its own penalties. For instance, in France,
violations can result in monetary fines, exclusion from public procurement, and
even criminal penalties of up to five years in prison for obstructing audits.
Germany imposes fines of up to €10 million, while some countries may
penalize companies with fines reaching up to 5 percent of their annual revenue.
China’s reporting regulation signals a new trend
Interestingly, while Europe and the US are debating regulatory rollbacks and
scaling back disclosure requirements, China is taking the opposite approach:
The country has recently published its first corporate sustainability
disclosure standards
(CSDS),
signaling a strong commitment to ESG transparency. These standards introduce
sector-specific reporting requirements and a phased approach to mandatory
disclosures for large companies. China's system focuses on a defined set of
quantitative environmental and social metrics, aligning closely with
international frameworks including
ISSB
and GRI. Additionally, China is integrating
sustainability reporting with its existing financial reporting structures.
For companies operating or selling globally, the emergence of CSDS represents a
shift in the ESG landscape worth their attention and therefore shows how
adopting a culture of measurement and disclosure avoids future risks and
promotes global competitiveness. As China solidifies its position as one of
the world's largest buyers and markets, companies that get ready to report ESG
performance will be better positioned to tap into this economic powerhouse.
Compliance with CSDS will require enhanced data collection and verification,
making sustainability reporting a key factor in regulatory approval and market
access. Failure to adapt could lead to barriers to market entry, reduced
attractiveness to investors and regulatory scrutiny. Additionally, supply chain
transparency
will become even more critical — as companies sourcing materials or
manufacturing in China must ensure that their suppliers meet CSDS requirements,
reinforcing ESG expectations across global supply networks.
Maintain momentum in data collection
One of the biggest mistakes companies can make is neglecting ESG data
management
in response to shifting regulations. Even if reporting obligations have been
postponed, robust sustainability
metrics
remain critical for risk assessment, stakeholder communication and long-term
strategy. Companies should continue refining their double materiality
assessments,
ensuring they capture both financial risks and social and environmental impacts.
ESG software systems should be embraced over obsolete, spreadsheet-based
methodologies and adapted to maintain structured, high-quality data and
reporting.
Reassess assurance requirements and audit commitments
Omnibus introduces changes to assurance requirements, postponing mandatory
shifts from limited to reasonable assurance. While this might seem like a
reprieve, companies shall reassess their audit contracts and engage with
auditors to determine what aspects of their ESG reports will remain critical.
Avoid last-minute contract revisions by proactively aligning audit scope with
evolving expectations. Additionally, ensure that sustainability reports maintain
credibility, as investors and financial institutions will continue to scrutinize
ESG claims.
Strengthen internal collaboration and market positioning
The fragmented implementation of Omnibus across EU member states means that
regulatory scenarios will vary by jurisdiction. For maximum clarity,
sustainability teams must work closely with external expert advisors and
in-house legal and finance departments to ensure alignment across multiple
regulatory environments. Simultaneously, businesses should leverage this moment
to reinforce their market position. Transparency and consistency in reporting
will remain essential for investor confidence and supply chain relationships.
Looking Ahead: ESG as a long-term competitive advantage
The Omnibus proposal is not a green light to roll back sustainability efforts.
If anything, it’s a stress test for corporate ESG strategies. Companies that
remain committed to robust sustainability practices will emerge stronger in the
long run, while those that take a reactionary approach risk falling behind.
Ultimately, the best corporate strategy in the face of Omnibus is not to wait
and see but to adapt and lead. By maintaining strong ESG data practices,
ensuring cross-functional
collaboration
and staying ahead of regulatory shifts, companies will not only safeguard
compliance but also strengthen their market position in an increasingly
sustainability-driven economy.
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CEO and Co-Founder, TransitionX Europe
Published Mar 7, 2025 2pm EST / 11am PST / 7pm GMT / 8pm CET