The recent EU Omnibus reform has fundamentally reshaped the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS), narrowing scope, delaying timelines, and simplifying requirements. While critics argue it weakens regulatory pressure on sustainability reporting, the changes present both challenges and new strategic clarity for companies, especially those aiming to embed sustainability into decision-making rather than treat it as a compliance checkbox.

What the Omnibus Reform Did

The Omnibus package, formally adopted by the European Parliament and Council as part of the Omnibus I legislative package on February 24 2026, recalibrated the CSRD to focus only on the largest European companies. Under the revised rules:

• Mandatory reporting now applies only to companies with more than 1,000 employees and over €450 million in net turnover: a significant narrowing from the original threshold (companies with ≥250 employees and either more than €50 million in turnover or €25 million in total assets). This removes a large share of mid-sized companies from mandatory reporting in the short to medium term, notably excluding organisations with 250–999 employees that were previously in scope.
• Complementarily, reporting timelines for those large EU companies (1,000+ employees, >€450 m turnover) and large non-EU companies (Wave 2 and Wave 3 companies) have been postponed by roughly two years.
• There are no changes for the large EU listed companies already in scope (public-interest entities already subject to the Non-Financial Reporting Disclosure -NFRD).
• Listed SMEs, previously expected to report by 2027 for the 2026 financial year, are now fully out of scope unless national compel them otherwise.

Taken together, this package dramatically reduces the number of companies that must comply with CSRD reporting obligations: 90% of the companies are out of scope after the implementation of the Omnibus reform compared to the original CSRD (Rasche et al. (2025)).

Meanwhile, the ESRS framework has been substantially simplified, with the number of required data points reduced by around 70 %, and industry estimates suggesting a 44 % reduction in reporting costs compared with the original standards. Larger companies could save over €1 million annually, while smaller firms may save around €150,000. (These cost estimates are based on a study commissioned by EFRAG).

Regulatory Pressure Eased but Yet Market Expectations Persist

Regulatory shift does not equate to market shift. Investors, customers, lenders, and partners are continuing to demand high-quality sustainability information, often beyond what regulation requires. Even when a company is not legally obliged to report under CSRD, stakeholders increasingly expect transparent and comparable sustainability data as part of due diligence, financing decisions, procurement, and risk assessments:

• Sustainability is a business imperative. Adapting operations to the realities of climate change, systematically collecting and managing GHG emissions data, strengthening partnerships across the value chain, and increasing transparency toward customers and end consumers are no longer optional: they are essential to maintaining competitiveness and enabling long-term, resilient growth.
• Sustainability is firmly linked to risk management. Companies that understand their ESG impacts are better equipped to identify hotspots and dependencies across their value chain, anticipate where long-term operational risks may arise, and uncover opportunities for innovation, efficiency, and competitive advantage. Conducting a Double Materiality Assessment (DMA) provides a structured way to identify and prioritise risks and opportunities in a way that truly matters for both the business and its stakeholders.
• Financial decision-making and capital allocation are increasingly shaped by ESG performance and the robustness of sustainability data. Access to finance, cost of capital, and investor confidence are progressively linked to how well companies manage climate-related risks. Recent research shows, for example, that firms operating in climate-vulnerable countries can face higher loan pricing.
• Supply chain oversight and partner communication are essential. Transparency in sustainability performance directly influences brand reputation, strengthens supplier relationships, and builds trust within the supply chain.
• To address uncertainty in the regulatory landscape, companies that establish a strong long-term strategy for transforming their business toward sustainability will be better positioned to anticipate future requirements, reduce the burden of reactive compliance, forecast investment needs, and leverage collaboration across their value chain. Research shows that organisations with proactive sustainability strategies not only adapt more efficiently to evolving regulation but also unlock strategic advantages through earlier integration of ESG risk management and stakeholder engagement (CEULA research on the cumulative effects of legislation).

While the CSRD may have been narrowed under the Omnibus reform, other EU regulations continue to impose sustainability reporting obligations across key industries. The Carbon Border Adjustment Mechanism (CBAM) requires embedded carbon reporting for imports in carbon-intensive sectors such as steel, cement and aluminium. The EU Emissions Trading System (EU ETS) strengthens emissions monitoring in sectors including aviation. In agriculture and land use, the LULUCF Regulation and the EU Deforestation Regulation (EUDR) require robust emissions accounting and supply-chain traceability for key commodities. Beyond EU-level legislation, national laws (such as Germany’s Supply Chain Due Diligence Act) and sustainable finance frameworks(including the EU Taxonomy and SFDR) continue to drive transparency and data expectations across markets.

Even companies that are no longer directly in scope of the CSRD should not assume they are unaffected. If part of their value chain (customers, suppliers, or financing partners) remains subject to reporting obligations, sustainability data will still be required upstream and downstream. In practice, this means that transparency expectations cascade across ecosystems: businesses may not have to report under CSRD themselves, but they will increasingly be asked to provide reliable, verifiable data to those who do.

The Real Opportunity: Strategic Data Over Compliance Data

The biggest opportunity isn’t simply ticking the boxes of a reporting standard: it’s using sustainability data to drive decisions. When organisations treat sustainability information as a strategic asset, feeding into investment decisions, operational planning, product strategy, and stakeholder engagement, sustainability becomes a value-creation driver, not a regulatory burden.

This is where COVERE² is essential: by helping organisations collect, verify, and analyse sustainability data in ways that inform strategic choices, beyond mere compliance, we empower businesses to align with evolving market expectations.