The proposed updates apply to various regulations in the Omnibus proposal, including corporate sustainability reporting, corporate sustainability due diligence, the taxonomy and the carbon border adjustment mechanism, a set of measures announced by the European Commission.
Significant changes in the proposal
Reduced reporting scope: The rules will now apply to fewer companies, meaning that not everyone must report their sustainability efforts. This change is designed to lessen the burden on smaller companies.
Extended implementation time: Companies will have more time to adapt to the new regulations. This extended timeline allows them to prepare better and adjust their operations accordingly.
Streamlined reporting and due diligence: Some aspects of the sustainability reporting and due diligence requirements have been simplified. For example, for due diligence, companies will mainly need to review their immediate suppliers rather than their entire supply chain, making the process more manageable.
Reduced scope of CBAM: The Carbon Border Adjustment Mechanism (CBAM) will now focus only on companies importing more than 50 tons of embedded carbon dioxide (CO2) per year. This change aims to target major importers while exempting smaller ones.
Who is affected?
Small and medium-sized companies: These businesses will be impacted the most. The threshold for mandatory corporate sustainability reporting has been raised, so companies with fewer than 1,000 employees and below 50 million euros in turnover or below a balance sheet value of 25 million euros will now have voluntary reporting standards. This provides flexibility for smaller enterprises.
Larger companies: These companies will continue operating under the same rules, with some proposed simplifications to make compliance easier. They will focus on first-tier suppliers for corporate due diligence and have until July 2028 to comply, giving them an extra year compared to earlier proposals.
Importers: Many small importers will be exempt from regulations, affecting 90 per cent fewer importers. However, the rules will still cover 99 per cent of emissions from imported goods and hefty industries like iron, steel, and cement.
What’s next?
The proposal is still under discussion, and several steps must be taken before it becomes law. Here’s what to expect:
Fast track for postponing rules: The EU Parliament and Council have confirmed the “stop-the-clock proposal,” allowing more time for reporting.
Trilogue negotiations: The EU Parliament, Council, and Commission will negotiate the final proposal, which might take a few months.
Implementation timeline: The final proposal could be adopted by late 2025 or early 2026 and needs to be integrated into national law, with corporate compliance expected by 2027 or 2028.
Simplifications for taxonomy: Decisions on the Taxonomy could be made this year and take effect next year.
Review of SFDR, investor regulations: The Sustainable Finance Disclosure Regulation, with potential changes from the Omnibus package, will be reviewed at the end of this year.
In summary, the proposed EU sustainability rules aim to balance rigorous environmental standards with practical business considerations. By understanding these changes and preparing accordingly, companies can contribute to a greener future while maintaining competitiveness.
Karl-Oskar Olming and Alva Jonevret are SEB’s representatives in the EU Platform on Sustainable Finance.
Please note that the information above is subject to change. To ensure you have the most accurate and up-to-date information, always refer to the official websites of relevant EU institutions.