Why the EU’s Omnibus proposals are a chance to focus on what really matters

The EU’s regulations on sustainability reporting, such as CSRD (Corporate Sustainability Reporting Directive), EU Taxonomy and CSDDD (Corporate Sustainability Due Diligence Directive), were expected to expand disclosure requirements to a greater number of companies. However, concerns were growing that these plans would impose too heavy an administrative burden on businesses. And not only for those headquartered in the EU, but also on firms based outside the Union, with EU operations and suppliers.

In response to these concerns, the European Commission announced its “Omnibus Simplification Package on sustainability” in February 2025 to simplify the planned expansion in reporting requirements. Omnibus (which is how we will refer to it throughout this paper) has two elements. Firstly, it proposes to delay the existing plans for expansion. Secondly, it proposes to scale back those future reporting requirements.

While the largest companies (those with over 500 employees) will still need to comply with the Corporate Sustainability Reporting Directive (CSRD), the Omnibus proposes to “stop the clock” on current plans to expand the requirements to mid-sized and smaller companies. The table below helps to show how companies are categorized and what the proposals to delay CSRD expansion means for them.

On April 3rd, the European Parliament voted in favor of this proposal, followed by approval by Member states on April 14th, therefore postponing CSRD compliance by 2 years for all companies not in “Wave 1”.

The second proposal, intended to simplify the scope of the CSRD, aims to exempt companies with under 1,000 employees, dramatically reducing the number of companies in scope of the directive by 80%.

Can companies breathe a sigh of relief?

The Omnibus proposals have been broadly welcomed, especially by smaller organizations hoping to release the burden and costs associated with completing detailed and specialized reporting.

The change in rules will simplify and, in some cases, delay reporting requirements for many businesses which, in turn, can reduce compliance risks. What it doesn’t do, however, is reduce the risks the regulations were originally designed to address; one of which being the growing potential for physical damage and business disruption caused by climate change.

A simplification of reporting means business leaders can really focus their efforts on implementing measures to proactively manage and adapt to the impacts of climate change”, says Mikaela Grundberg, Climate Risk Consultant at Zurich Resilience Solutions. And the business case for this is clear. Climate resilient infrastructure investment alone has a benefit-cost ratio of about 6 to 1, meaning that for every dollar invested, six dollars can be saved. This means that for every dollar invested, six dollars can be saved.

“The Omnibus proposal gives many businesses a greater opportunity to focus on activities that place customer and shareholder value at the heart of their decision making and business resilience strategy”.

Why should businesses use this as an opportunity to accelerate their approach to climate change adaptation?

• Both the economic value and insured value of natural catastrophe losses continues on an upward trend, which is having a significant impact on the insurance industry, and the availability and affordability of coverage in many regions. This is putting an even greater spotlight on the importance of proactive monitoring and management of climate-related risks, regardless of regulatory requirements and reporting timelines.
• Adapting to extreme weather patterns is an essential pillar of long-term business resilience. By quantifying risks and calculating the potential financial impact of loss events, companies are able to prioritize budgets and adaptation strategies that protect critical assets, safeguard employees and minimize business interruption.
• A strategic approach to climate adaptation requires scenario planning. By using IPCC-aligned climate scenarios, businesses can stress-test the impact of different risk management measures and prepare for a range of acute and chronic physical risks that may occur as a result of climate change, rather regulatory compliance being the primary driver of action.
• While reporting may become simplified as a result of the Omnibus proposals, external stakeholder pressure to monitor and manage climate-related risks still persists. Investors, suppliers, insurers, and customers increasingly expect climate risk transparency and adaptive action as a demonstration of long-term resilience and security, regardless of regulatory delays and simplification.
• As companies invest in new sites, development projects and production facilities to meet their net-zero transition goals, it is crucial to consider the potential impacts of extreme weather events on these sites, in the short and long-term, to safeguard those investments and underpin net-zero transition plans with resilient infrastructure.
• Regulatory reporting initiatives have helped businesses to take a more coordinated approach to sustainability and climate-related risks, but the simplifications proposed by Omnibus do not need to derail this progress. Climate change remains a cross-functional challenge, and the use of forward-looking, consistent climate risk data can enable diverse teams – from Sustainability, to Risk Management and Operations - to align strategies, combine resources and implement measures to both monitor and respond to the physical risks presented by climate change.

Despite the uncertainty, companies should not take their eye off climate-related reporting

For large companies with more than 1,000 employees, with a turnover of more than EUR 50 million, or a balance sheet above EUR 25 million, very little will change in light of the Omnibus proposals, so these companies should continue in their existing efforts to identify, manage and report on climate-related risks in line with CSRD requirements. Quantifying physical climate risks and documenting adaptation strategies directly supports CSRD-aligned reporting, especially for ESRS E1 and scenario analysis requirements.

Many companies who were expecting to begin reporting under EU sustainability rules within the next year (Wave 1 and 2) have already begun to incorporate climate risk into their wider risk management and sustainability strategies. A delay in reporting requirements should not act as a trigger to undo or water down these efforts when the climate risks themselves are actually increasing. In fact, the proposed delays can provide companies with the capacity and opportunity to accelerate the implementation of risk monitoring and adapting, which will subsequently help them to be better prepared if/and when requirements for mandatory reporting return.

And while the implementation of mandatory climate-related reporting for smaller companies (Wave 3) appears to be increasingly unlikely, these companies are widely considered to be the most vulnerable to the impacts of climate change. “Unfortunately, it is often the case that companies with less financial stability, and a more localized, concentrated customer base, can find it particularly difficult to recover after an extreme weather event”, says Jorge Bernal Surman, Global Climate Exposure Lead at Zurich Resilience Solutions. “This is why companies that are able to minimize financial loss and maintain customer service standards in the face of adverse weather events can build reputational and competitive advantage”.

The physical risks presented by climate change are here to stay

Geopolitics will change, however, just as regulations can change – but it is certain that extreme weather events will continue to impact the business world. Companies that commit to taking climate-related risks seriously, regardless of compliance requirements, will position themselves for competitive advantage in terms of investor confidence, insurance placement, and customer goodwill.

Now, more than ever, climate resilience should be viewed as a business value driver than compliance cost.

Originally published in Commercial Risk on June 10, 2025.